TREASURIES-Yields mixed, but market more optimistic about virus outlook

    By Gertrude Chavez-Dreyfuss
    NEW YORK, April 14 (Reuters_ - U.S. Treasury yields were
mixed on Tuesday, with those on the long end drifting higher, as
investors were cautiously optimistic that the United States was
nearing the apex of the coronavirus outbreak and looked forward
to the reopening of the economy.
    "I think there is more optimism in the market. The question
we're now getting is: Are we going to open up the economy soon?
Is there going to be some risk-taking?," said Stan Shipley,
fixed-income strategist, at Evercore ISI in New York.
    "If we're going to do that, investors which have piled into
Treasuries here are gradually going to migrate to more risky
assets," he added.
    The optimism was borne out of reports that the virus
outbreak was slowing in New York and some other states.
    On Monday, the United States reported about 1,500 new
COVID-19 fatalities, below last week's running tally of roughly
2,000 deaths every 24 hours. 
    As a result, New York and six other northeastern states said
on Monday they would formulate a regional plan to gradually lift
social-distancing restrictions that have shut down non-essential
businesses and schools.
   On the Pacific Coast, the governors of California, Oregon and
Washington state said they also would take a regional approach. 
    U.S. stocks were also higher on the day.
    In late morning trading, U.S. 10-year yields
slipped to 0.740% from 0.749% late on Monday.
    Evercore's Shipley said it feels like the 10-year yield is
starting to form a base.
    "When you come down this far from 2.0% in the 10-year, it
takes a while to form a base here," Shipley said. "We're not
saying rates are going to jump from here. Too early for that."
    Yields on U.S. 30-year bonds were at 1.404%, up
from 1.39% on Monday.
    On the short end of the curve, U.S. 2-year yields were last
at 0.235%, down from Monday's 0.243%.
    The yield curve has flattened a little bit on Tuesday, with
the spread between the 10-year and the 2-year narrowing to 50
basis points, from about 52 basis points on Monday. The curve
has been steepening since the beginning of the health crisis as
investors have priced out any rate increase in the immediate
future.
    BMO Capital Markets said steepening is the path of least
resistance for the yield curve.
    "The curve has become largely a directional trade as the
2-year sector remains well-anchored in the 20-30 bp
(basis-point) range with dim prospects for a breakout of any
significance," BMO said in a research note. 
    
      April 14 Tuesday 10:54AM New York / 1454 GMT
                               Price                  
 US T BONDS JUN0               177-30/32    -0-6/32   
 10YR TNotes JUN0              138-76/256   0-56/256  
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             0.21         0.2136    -0.050
 Six-month bills               0.235        0.2385    -0.041
 Two-year note                 100-72/256   0.231     -0.012
 Three-year note               99-224/256   0.2919    -0.018
 Five-year note                100-112/256  0.4108    -0.019
 Seven-year note               100-40/256   0.602     -0.023
 10-year note                  107-44/256   0.7425    -0.007
 30-year bond                  114-124/256  1.404     0.014
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        20.25        -1.00    
 spread                                               
 U.S. 3-year dollar swap        14.25         0.00    
 spread                                               
 U.S. 5-year dollar swap        12.75        -0.50    
 spread                                               
 U.S. 10-year dollar swap        6.25         0.00    
 spread                                               
 U.S. 30-year dollar swap      -37.00         0.00    
 spread                                               
 
 (Reporting by Gertrude Chavez-Dreyfuss)
  

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