TREASURIES-Yields rise on vaccine optimism, ahead of Fed minutes

By Ross Kerber

Nov 23 (Reuters)U.S. Treasury yields moved higher on Monday and the yield curve steepened as investors took encouragement from positive COVID-19 vaccine news and looked ahead to minutes from the U.S. Federal Reserve due out later in the week.

The benchmark 10-year US10YT=RR yield was up 2.3 basis points at 0.8521% in morning trading.

A closely watched part of the U.S. Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes, US2US10=RR seen as an indicator of economic expectations, was at 69 basis points, about 3 basis points higher than Friday’s close.

Investors seemed to be moving out of ultra-safe U.S. Treasuries as stocks and commodities markets rose, said Subadra Rajappa, head of U.S. rates strategy for Societe Generale.

They were also positioning ahead of minutes of the Fed’s Open Markets Committee due out Wednesday, she said, and keeping an eye out for controversial cabinet picks by U.S. President-elect Joe Biden, who so far has signaled he will chose a relatively moderate lineup of top officials to run U.S. agencies.

“If there are any interesting or controversial picks that might create some volatility,” she said. She added that seems unlikely since Biden’s nominees may have to be confirmed by a Republican-controlled Senate.

On Sunday evening a person close to Biden’s transition said he would pick senior aide Anthony Blinken as U.S. Secretary of State, elevating a former No. 2 at the State Department.

U.S. stock index futures rose on Monday as hopes that the first COVID-19 vaccine could be available within weeks renewed bets of a swift economic recovery next year.

U.S. healthcare workers and others recommended for the nation’s first inoculations could start getting shots within a day or two of regulatory consent next month, a top official of the government’s vaccine development effort said on Sunday.

The two-year US2YT=RR U.S. Treasury yield, which typically moves in step with interest rate expectations, was down less than a basis point at 0.1614% in morning trading.

November 23 Monday 8:54AM New York / 1354 GMT

Price

Current Yield %

Net Change (bps)

Three-month bills US3MT=RR

0.07

0.071

0.003

Six-month bills US6MT=RR

0.0925

0.0938

0.000

Two-year note US2YT=RR

99-238/256

0.1614

-0.002

Three-year note US3YT=RR

100-26/256

0.2157

0.003

Five-year note US5YT=RR

99-88/256

0.3844

0.008

Seven-year note US7YT=RR

99-34/256

0.628

0.020

10-year note US10YT=RR

100-56/256

0.8521

0.023

20-year bond US20YT=RR

100-96/256

1.3535

0.021

30-year bond US30YT=RR

101-188/256

1.5524

0.021

DOLLAR SWAP SPREADS

Last (bps)

Net Change (bps)

U.S. 2-year dollar swap spread

9.00

0.25

U.S. 3-year dollar swap spread

8.25

0.25

U.S. 5-year dollar swap spread

7.00

0.50

U.S. 10-year dollar swap spread

-0.25

0.25

U.S. 30-year dollar swap spread

-31.75

0.25

(Reporting by Ross Kerber in Boston; Editing by Kirsten Donovan)

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