(Updates with market activity, repo rate)
By Kate Duguid and Ross Kerber
April 21 (Reuters) - U.S. Treasury yields remained
range-bound on Wednesday even after an auction of 20-year bonds
showed strong demand, a pattern analysts expect to persist until
next week's economic data releases and Federal Reserve policy
meeting.
Absent much economic news, the benchmark 10-year yield
has languished since hitting a high of 1.776% on
March 30, and this week has traded within a range of 1.552% and
1.633%. It was last at 1.559%, nearly unchanged for the session.
In a $24 billion U.S. Treasury auction of 20-year bonds
in the early afternoon, direct bidders took 20.2% of
the offer.
That was five percentage points more than average and the
first time in the 12-month auction history of the bonds that
direct bidders accounted for more than 20% of accepted bids,
according to a note from DRW Trading market strategist Lou
Brien, who called the demand "strong."
Eric Jussaume, director of fixed income for Cambridge Trust,
said the result suggested the bonds retain their appeal for
non-U.S. buyers like those facing negative interest rates at
home, even as the Fed signals no plan to hike rates soon.
"There's still a lot of demand for long-end paper,
especially from foreign buyers," Jussaume said.
However, after the auction the yield on the bond was almost
unchanged for the day like other U.S. debt, and was last at
2.1442%.
Separately, the Bank of Canada signaled that it could start
hiking interest rates in late 2022, as it sharply boosted its
outlook for the Canadian economy and reduced the scope of its
bond-buying program.
Wall Street rallied, rebounding from a two-day decline, as a
tilt toward stocks poised to benefit from a recovering economy
offset a sell-off in shares of Netflix Inc after it
reported disappointing results.
In the overnight repurchase market, the repo rate fell to 0%
on Wednesday from 0.1% in the previous session,
weighed down by an influx of cash from government state
enterprises Fannie Mae, Ginnie Mae and Freddie Mac.
The two-year yield remained anchored, which also
left the yield curve - as measured by the spread between two-
and 10-year yields - at 141 basis points, roughly
the same as Tuesday's close.
"There's not much going on. The last couple of days have had
no data. We've been consolidating around these levels. The next
important data point is going to be the Fed. But again, we're
not expecting much in the way of policy hints at next week's
meeting," said Subadra Rajappa, head of U.S. rates strategy at
Societe Generale.
The U.S. central bank's Federal Open Market Committee will
meet April 27-28 and is not expected to make any meaningful
adjustments to policy.
April 21 Wednesday 3:35PM New York / 1935 GMT
Price Current Net
Yield % Change
(bps)
Three-month bills 0.0225 0.0228 -0.002
Six-month bills 0.0375 0.038 -0.005
Two-year note 99-244/256 0.1492 -0.004
Three-year note 100-44/256 0.317 -0.003
Five-year note 99-198/256 0.7969 0.002
Seven-year note 100-28/256 1.2335 -0.002
10-year note 96-16/256 1.559 -0.003
20-year bond 95-172/256 2.1442 -0.003
30-year bond 91-176/256 2.2596 0.000
DOLLAR SWAP SPREADS
Last (bps) Net
Change
(bps)
U.S. 2-year dollar swap 12.00 0.50
spread
U.S. 3-year dollar swap 13.25 0.75
spread
U.S. 5-year dollar swap 8.75 0.00
spread
U.S. 10-year dollar swap -1.00 0.25
spread
U.S. 30-year dollar swap -27.00 0.75
spread (Reporting by Kate Duguid in New York and by Ross Kerber in
Boston
Editing by Nick Zieminski and Paul Simao)
