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* Markets bet bill on $2,000 aid check will not pass in
Senate
* U.S. yield curve modestly steeper
* U.S. 7-year note auction shows lackluster results
(Recasts, adds comment, 7-year note auction results, updates
prices)
By Gertrude Chavez-Dreyfuss
NEW YORK, Dec 29 (Reuters) - U.S. Treasury yields were
little changed to slightly higher on Tuesday in choppy trading,
on expectations that a heftier federal stimulus check was
unlikely to get the nod in the Republican-led U.S. Senate.
Legislation on a $2,000 stimulus check is in the Senate's
hands on Tuesday after President Donald Trump signed a $2.3
trillion pandemic aid and spending package on Sunday.
Risk appetite ebbed during the latest hour, with yields
turning lower for some maturities and shares on Wall Street
retreating as investors digested comments from congressional
leaders on the hotly debated stimulus.
U.S. Senate Majority Leader Mitch McConnell said he objected
to Senate Democratic leader Chuck Schumer's call for the chamber
to approve the $2,000 relief check by unanimous consent.
McConnell also said the Senate will address the issue this week.
"The wall among Senate Republicans to stick to $600 impact
payments is cracking, but the majority leader could have the
cement to hold it together," said Jim Vogel, senior rates
strategist at FHN Financial in Memphis, Tennessee, in his latest
research note.
"Time is running out, maybe," he added.
As this developed, the Treasury's U.S. 7-year note auction
showed tepid results, weighed down by the increase in auction
size, and in line with the underwhelming outcomes for the 2-year
and 5-year offerings on Monday.
The high yield was at 0.662%, slightly higher than the
"when-issued" or expected level of around 0.660% at the bid
deadline, which meant investors demanded a little more yield to
own the paper.
There were $136.6 billion in bids for a 2.31 bid-to-cover
ratio, a gauge of demand. That ratio was lower than last month's
2.37 and the 2.47 average, according to analysts. Indirect
bidders, which include foreign central banks, took 60.3% of
supply, lower than November's 65.4% uptake, and the 63.1%
average.
The U.S. yield curve, meanwhile, was slightly steeper on the
day, with the overall steepening trend still intact amid
increased risk appetite trending the last few sessions, as well
as expectations of higher inflation. The yield spread between
2-year and 10-year notes was at 80.4 basis.
Last week, that curve hit its widest in more than three
years. Since late July, the gap between U.S. 2-year and 10-year
yields has widened by roughly 50 basis points.
In early afternoon trading, the U.S. benchmark 10-year yield
was flat at 0.934%, from 0.933% late on Monday.
Post-auction, U.S. 7-year note yields were last down at
0.645%, from 0.648% on Monday.
U.S. 30-year yields rose to 1.675% from Monday's
1.669%.
On the front end of the curve, U.S. 2-year yields inched
lower to 0.128% from 0.133% on Monday.
Breakeven rates on 10-year TIPS, which measure
expected annual inflation for the next 10 years, slipped to
1.962%, from Monday's 1.967%.
December 29 Tuesday 1:52PM New York / 1852 GMT
Price Current Net
Yield % Change
(bps)
Three-month bills 0.095 0.0963 -0.005
Six-month bills 0.1 0.1014 -0.003
Two-year note 99-254/256 0.1289 -0.004
Three-year note 99-220/256 0.1727 0.000
Five-year note 99-254/256 0.3766 -0.003
Seven-year note 99-220/256 0.6458 -0.002
10-year note 99-112/256 0.9347 0.002
20-year bond 98-100/256 1.4686 0.008
30-year bond 98-216/256 1.6743 0.005
DOLLAR SWAP SPREADS
Last (bps) Net
Change
(bps)
U.S. 2-year dollar swap 7.75 -0.25
spread
U.S. 3-year dollar swap 7.75 0.00
spread
U.S. 5-year dollar swap 7.00 -1.00
spread
U.S. 10-year dollar swap 1.00 0.00
spread
U.S. 30-year dollar swap -24.75 0.50
spread (Reporting by Gertrude Chavez-Dreyfuss; Editing by Dan Grebler)
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