Bond, stock divergence continues as investors await data
By Ross Kerber Aug 3 (Reuters) - Traders left U.S. Treasury yields little changed on Tuesday as they awaited economic data, reinforcing an unusual divergence between bond and equity price trends. Even as stock markets have been fired up by strong corporate earnings, the benchmark 10-year yield sagged below 1.2% on Monday and was at 1.1656% on Tuesday morning, down less than a basis point for the session. The trading was in line with the note's steady march down from this year's high yield of 1.776% reached March 30. "Stocks and bonds have been living two separate lives over the past few months," said Padhraic Garvey, head of research for ING Americas. Traditionally the rush into Treasuries would signal economic pessimism, but bond-buying by the U.S. Federal Reserve and other central banks has made the significance of the low yields "hard to decipher," he said. Forthcoming economic data including a closely watched jobs report due Friday could provide investors clearer signals. Fed leaders are hashing out just how quickly to end crisis-era policies. In an interview with Reuters on Monday, St. Louis Fed President James Bullard said the COVID-19 pandemic may have pushed the United States into a volatile era of stronger growth and better productivity, but also higher interest rates and faster inflation. Wall Street's main indexes opened higher on Tuesday. The yield on 10-year Treasury Inflation Protected Securities was -1.179%, up from its record low of -1.214% reached Monday. The 10-year TIPS break-even inflation rate was at 2.35%, little changed from the day before. A closely watched part of the U.S. Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes, seen as an indicator of economic expectations, was at 99 basis points, about 2 basis points lower than Monday's close. The two-year U.S. Treasury yield, which typically moves in step with interest rate expectations, was unchanged at 0.1762%. August 3 Tuesday 9:39 AM New York / 1339 GMT Price Current Net Yield % Change (bps) Three-month bills 0.05 0.0507 -0.002 Six-month bills 0.055 0.0558 -0.002 Two-year note 99-230/256 0.1762 0.000 Three-year note 100-42/256 0.319 -0.003 Five-year note 99-228/256 0.6473 -0.003 Seven-year note 100-102/256 0.941 -0.006 10-year note 104-60/256 1.1656 -0.006 20-year bond 108-104/256 1.7455 -0.011 30-year bond 112-52/256 1.8408 -0.010 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 7.50 0.00 spread U.S. 3-year dollar swap 11.50 -0.25 spread U.S. 5-year dollar swap 8.75 -0.25 spread U.S. 10-year dollar swap 2.25 -0.50 spread U.S. 30-year dollar swap -25.50 -0.50 spread (Reporting by Ross Kerber in Boston)
