TREASURIES-Yields narrowly mixed, market optimistic about virus outlook

    * U.S. virus deaths top 25,000, but pace slowing -Reuters
    * NY hospitalizations fall for 1st time since outbreak
    * Fed's Bullard says V-shaped recovery still possible
    * U.S. yields starting to form a base -analyst

 (Adds new comment, updates prices)
    By Gertrude Chavez-Dreyfuss
    NEW YORK, April 14 (Reuters) - U.S. Treasury yields were
mixed in rangebound trading on Tuesday, as investors lacked
incentives to move decisively in either direction even as they
were cautiously optimistic about the outlook for the coronavirus
outbreak and looked forward to the reopening of the economy.
    "The balance of headlines on the coronavirus is
significantly more positive than negative," said Tom Simons,
money market economist at Jefferies in New York. 
    He added that people are looking at the type of U.S.
recovery that can happen once the virus is gotten under control.
    St. Louis Federal Reserve President James Bullard said on
Tuesday a V-shaped recovery is still possible if businesses and
households are still able to pay their bills and if testing for
the virus becomes widely available.
    Jefferies' Simons said if not a V-shaped recovery, the U.S.
we can probably have more like a check mark-shaped rebound, in
which a downturn is followed a prolonged but slow recovery. 
    The optimism was borne out of reports that the virus
outbreak was slowing in many parts of the country.
    U.S. deaths from the novel coronavirus topped 25,000 on
Tuesday, according to a Reuters tally. So far this week, deaths
have increased by about 7% per day on average compared with 14%
last week and 30% many days in March. Cases this week are up an
average of 5% per day compared with 7.8% last week and 30% per
day in March.
    In New York, the total number of people hospitalized fell
for the first time since the onset of the coronavirus outbreak,
a further sign the state at the epicenter may be at the peak of
its crisis, Governor Andrew Cuomo said on Tuesday.
    U.S. stocks were also higher on the day.
    In afternoon trading, U.S. 10-year yields edged
higher to 0.753% from 0.749% late on Monday.
    Evercore ISI fixed income strategist Stan 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 1.409%, up
from 1.39% on Monday.
    On the short end of the curve, U.S. 2-year yields were last
at 0.231%, 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
    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 2:16 PM New York / 1816 GMT
 US T BONDS JUN0               177-27/32    -0-9/32   
 10YR TNotes JUN0              138-60/256   0-40/256  
                               Price        Current   Net
                                            Yield %   Change
 Three-month bills             0.205        0.2085    -0.056
 Six-month bills               0.225        0.2284    -0.051
 Two-year note                 100-74/256   0.227     -0.016
 Three-year note               99-226/256   0.2893    -0.021
 Five-year note                100-108/256  0.414     -0.016
 Seven-year note               100-32/256   0.6066    -0.018
 10-year note                  107-36/256   0.7456    -0.003
 30-year bond                  114-168/256  1.3975    0.008
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
 U.S. 2-year dollar swap        20.75        -0.50    
 U.S. 3-year dollar swap        14.50         0.25    
 U.S. 5-year dollar swap        12.75        -0.50    
 U.S. 10-year dollar swap        6.25         0.00    
 U.S. 30-year dollar swap      -37.00         0.00    
 (Reporting by Gertrude Chavez-Dreyfuss; Editing by Steve
Orlofsky and Jonathan Oatis)

Source: Read Full Article