TREASURIES-U.S. Treasury yields rebound after weak 20-year bond auction

    (Adds results of 20-year Treasury auction)
    By Herbert Lash
    NEW YORK, July 21 (Reuters) - Yields on U.S. Treasuries
rebounded for a second day on Wednesday, with a sale of 20-year
government debt on the weak side, as fears of new COVID-19
lockdowns eased and a rally in equity markets pointed to a
robust economic recovery.
    The Treasury sold $24 billion of 20-year bonds to yield
1.890%, which was more than one full basis point higher than the
yield at the bidding deadline and a bit weak, said Lou Brien,
market strategist at DRW Trading.
    The bid cover at 2.33 to 1 was slightly less than average,
he said.
    The yield on 10-year Treasury notes was up 7.9
basis points to 1.288%, after briefly crossing above 1.3%.
    The yield on the 30-year Treasury bond rose 7.8
basis points to 1.947%.
    Investors are grappling with when the Federal Reserve will
begin 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 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 almost 17 basis points
since then.
    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 limit 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 108.5 basis points.
    The two-year U.S. Treasury yield, which typically
moves in step with interest rate expectations, was up 0.8 basis
points at 0.202%.
    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
2.299%, indicating the market sees inflation averaging about
2.3% a year for the next decade.

July 21 Wednesday 1:24 p.m. New York/1724 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                 99-218/256   0.2017    0.008
 Three-year note               99-254/256   0.3776    0.021
 Five-year note                100-186/256  0.725     0.051
 Seven-year note               101-112/256  1.0348    0.067
 10-year note                  103-24/256   1.2884    0.079
 20-year bond                  106-84/256   1.8664    0.083
 30-year bond                  109-164/256  1.9472    0.078

                               Last (bps)   Net
 U.S. 2-year dollar swap         8.50         0.50
 U.S. 3-year dollar swap        10.50         1.00
 U.S. 5-year dollar swap         8.00         1.00
 U.S. 10-year dollar swap       -0.25         1.50
 U.S. 30-year dollar swap      -29.00         1.75

 (Reporting by Sujata Rao; Editing by Marguerita Choy and Mark

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