TREASURIES-U.S. Treasury yields rebound ahead of 20-year auction

    (Updates with prices, analyst comment)
    By Herbert Lash
    NEW YORK, July 21 (Reuters) - The yield on benchmark U.S.
Treasuries rebounded for a second day on Wednesday as fears of
new COVID-19 lockdowns eased and a rally in equity markets
pointed to a robust economic recovery as investors awaited an
auction of 20-year Treasury bonds.
    The yield on 10-year Treasury notes was up 7.9
basis points to 1.288%.
    The yield on the 30-year Treasury bond was up
7.7 basis points to 1.946%.
    Investors are grappling with when the Federal Reserve begins
to remove, or "taper," its support for the U.S. economy and
whether a recent hike in inflation is transitory, as the Fed
projects, or will be persistent as many in the market believe.
    Yields on the benchmark 10-year Treasury note plunged almost
30 basis points from July 13, when data showed the biggest jump
of U.S. consumer prices in 13 years in June, to a low of 1.128%
early on Tuesday. Yields have rebounded 16 basis points since
    The Treasury plans to sell $24 billion in 20-year bonds at 1
p.m. EDT (1700 GMT).
    Traders also are waiting to see the Congressional Budget
Office's latest estimate of when the U.S. government would be
unable to pay its bills if Congress does not approve an increase
in the debt ceiling, currently at $28.5 trillion.
    The federal government has shut down three times in the past
decade over debt haggling in Congress.
    "The main event today is the CBO report on the debt limit,"
said Nancy Davis, managing partner and chief investment officer
at Quadratic Capital Management LLC in Greenwich, Connecticut.
"Some of the 10-year move is ahead of that event."
    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 107.9 basis points.
    The two-year U.S. Treasury yield, which typically
moves in step with interest rate expectations, was up 1.4 basis
points at 0.208%.
    The breakeven rate on five-year U.S. Treasury
Inflation-Protected Securities (TIPS) was last at
    The 10-year TIPS breakeven rate was last at
2.291%, indicating the market sees inflation averaging about
2.3% a year for the next decade.

  July 21 Wednesday 11:08AM New York / 1508 GMT
                               Price        Current   Net
                                            Yield %   Change
 Three-month bills             0.05         0.0507    0.000
 Six-month bills               0.05         0.0507    0.000
 Two-year note                 99-215/256   0.2078    0.014
 Three-year note               99-250/256   0.3829    0.026
 Five-year note                100-176/256  0.733     0.059
 Seven-year note               101-104/256  1.0394    0.071
 10-year note                  103-24/256   1.2884    0.079
 20-year bond                  106-100/256  1.8628    0.080
 30-year bond                  109-168/256  1.9465    0.077

                               Last (bps)   Net
 U.S. 2-year dollar swap         8.25         0.25
 U.S. 3-year dollar swap        10.75         1.25
 U.S. 5-year dollar swap         8.50         1.50
 U.S. 10-year dollar swap        0.25         2.00
 U.S. 30-year dollar swap      -28.75         2.00

 (Reporting by Sujata Rao; Editing by Will Dunham, Nick
Zieminski and Mark Heinrich)

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