TREASURIES-Longer-term yields rise, steepen yield curve

Market trading boards are seen at the Australian Securities Exchange in Sydney, Friday, February 9, 2018. ( AAP Image/Ben Rushton) NO ARCHIVING
 (Updates with market activity, status of aid talks in
Washington)
    By Ross Kerber
    July 31 (Reuters) - Longer-term U.S. Treasury yields rose
off near-record lows on Friday, but caution held back
shorter-term rates and steepened the yield curve as talks in
Washington on a new coronavirus aid bill continued.
    The benchmark 10-year yield was up 1.3 basis
points at 0.5543% in  afternoon trading after reaching as low as
52 basis points, the least since March.
    The gap between yields on two- and 10-year Treasury notes,
 seen as an indicator of economic expectations, was
at 43 basis points, about a basis point above Thursday's close
and well above the 40 basis point level it touched earlier
Friday.
    Stock indexes had opened higher based on strong earnings
from top technology companies, then fell on continuing economic
concerns.    
    In Washington, negotiations over another coronavirus relief
bill continued and U.S. House of Representatives Speaker Nancy
Pelosi said talks with the White House were not yet on a path
toward reaching a deal, hours before the expiration of federal
unemployment benefits.
    The two-year U.S. Treasury yield, which typically
moves in step with interest rate expectations, was almost
unchanged at 0.1172% and remained close to its all-time low of
0.105% reached on May 8.
    The economy as a whole is unlikely to improve until public
health issues stemming from the COVID-19 pandemic are resolved,
said Raymond James market strategist Ellis Phifer. Early signs
of an economic comeback proved premature as virus cases have
continued rise and kept people at home.
    "That's bad for the economy since we're consumer driven,"
Phifer said.
    The Commerce Department said on Friday that consumer
spending, which accounts for more than two-thirds of U.S.
economic activity, rose 5.6% last month after a record 8.5% jump
in May as more businesses reopened.  
    The data was included in Thursday's advance gross domestic
product report for the second quarter, which showed the economy
shrinking at a record 32.9% annualized rate as consumer spending
tanked at a historic 34.6% pace.
    The United States leads the world in COVID-related
fatalities with more than 150,000 in five months. 
        
      July 31 Friday 1:55PM New York / 1755 GMT
                                                      
                                                      
                                                      
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             0.0925       0.0938    -0.002
 Six-month bills               0.1025       0.1043    0.000
 Two-year note                 100-4/256    0.1172    -0.004
 DThree-year note              99-254/256   0.1277    -0.008
 Five-year note                100-30/256   0.2264    -0.004
 Seven-year note               99-204/256   0.4045    0.004
 10-year note                  100-172/256  0.5543    0.013
 20-year bond                  102-80/256   0.9959    0.022
 30-year bond                  100-200/256  1.2186    0.022
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap         7.00         0.50    
 spread                                               
 U.S. 3-year dollar swap         6.00         0.50    
 spread                                               
 U.S. 5-year dollar swap         4.25         0.50    
 spread                                               
 U.S. 10-year dollar swap       -1.00         0.00    
 spread                                               
 U.S. 30-year dollar swap      -42.75        -1.00    
 spread                                               
                                                      
 
    

    
 (Reporting by Ross Kerber in Boston
Editing by Nick Zieminski and Cynthia Osterman)
  

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