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TREASURIES-Treasury yields edge up on expectations of Biden stimulus plan

Herbert Lash
·4 min read

By Herbert Lash NEW YORK, Jan 14 (Reuters) - Treasury yields edged higher on Thursday in anticipation of a new stimulus package from the incoming Biden administration, but a jump in U.S. jobless claims put a damper on immediate expectations of economic growth amid more government debt. President-elect Joe Biden is scheduled later on Thursday to unveil a stimulus package proposal that is designed to jump-start the economy with a lifeline that could exceed $1.5 trillion and help minority communities. The number of Americans filing first-time applications for unemployment benefits surged last week, the Labor Department said in a report that confirmed the labor market was weakening as a surge in COVID-19 cases disrupts businesses. "The market was primed for higher rates today for continued increase in yields today in anticipation of what Biden is going to say tonight, until we hit jobless claims," said Jim Vogel, interest rate strategist at FHN Financial in Memphis. Initial claims for state unemployment benefits increased 181,000 to a seasonally adjusted 965,000 for the week ended Jan. 9, the highest since late August. Economists polled by Reuters had forecast 795,000 applications for the latest week. Unadjusted claims shot up 231,335 to 1.151 million. Economists prefer the unadjusted number because of earlier difficulties adjusting the claims data for seasonal fluctuations due to the economic shock of the pandemic. Jobless claims had more of an impact than they necessarily would have, Vogel said. With the Federal Reserve indicating low interest rates for an extended period, there should be a stronger peg at the short end out as far as five years, he said. But that got swept away during a sell-off last week that pushed yields on benchmark 10-year Treasuries to highs last seen in March. Strong demand for the Treasury Department's auctions of 10-year and 30-year debt this week helped stem the sell-off and pull yields lower. Fed officials this week also have pushed back at speculation that they are close to curbing the U.S. central bank's monthly bond purchases or raising rates. "Now as we see calmer CPI and sadly, more jobless claims in the most recent period, the short-end is gaining some stability," Vogel said. The stimulus package to be announced by Biden in a prime-time address on Thursday has a price tag above $1.5 trillion and includes a commitment for $1,400 stimulus checks for many Americans, according to a source familiar with the proposal. Biden, who defeated President Donald Trump in the Nov. 3 election, also is expected to commit to partner with private companies to increase the number of Americans getting coronavirus vaccinations. Yields on the 10-year Treasury note dropped to 1.075% overnight, before later edging up. They are still down from an almost 10-month high of 1.187% on Tuesday. The yield curve between two-year and 10-year notes steepened slightly to 95.50 basis points. Thirty-year bond yields traded at 1.839%, up from earlier lows of 1.806%. Five-year note yields edged up to 0.477%. January 14 Thursday 10:34AM New York / 1534 GMT Price Current Net Yield % Change (bps) Three-month bills 0.08 0.0811 -0.005 Six-month bills 0.09 0.0913 -0.003 Two-year note 99-246/256 0.145 -0.002 Three-year note 99-182/256 0.2217 -0.002 Five-year note 99-134/256 0.4724 -0.002 Seven-year note 98-216/256 0.7961 0.005 10-year note 97-232/256 1.1002 0.012 20-year bond 95-136/256 1.6398 0.018 30-year bond 95-40/256 1.8366 0.019 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 7.00 0.00 spread U.S. 3-year dollar swap 6.50 0.50 spread U.S. 5-year dollar swap 7.25 0.25 spread U.S. 10-year dollar swap 0.75 0.00 spread U.S. 30-year dollar swap -24.75 -0.25 spread (Reporting by Herbert Lash Editing by Paul Simao)