TREASURIES-U.S. yields slide as growth concerns weigh, ahead of Fed meeting

       By Gertrude Chavez-Dreyfuss
    NEW YORK, July 27 (Reuters) - U.S. Treasury yields fell on
Tuesday, as risk appetite continued to languish amid nagging
concerns about high inflation and the fast-spreading Delta
coronavirus variant that could thwart global economic growth.
    Investors are also cautious ahead of the U.S. Federal
Reserve's two-day monetary policy meeting, which begins on
Tuesday. Analysts said the Fed is likely to stand pat on policy,
but could discuss plans for tapering its asset purchases during
the Jackson Hole, Wyoming, gathering in August.
    The yield on 10-year Treasury Inflation-Protected Securities
(TIPS) plunged to a record low of -1.147% for a
second straight session on Tuesday, as investors bought TIPS
concerned about steep consumer prices.
    U.S. durable goods disappointed expectations, rising 0.8%
compared with forecasts for a 2.1% rise. Orders for nondefense
capital goods excluding aircraft, a closely watched proxy for
business spending plans, rose 0.5% last month, compared with
expectations for a 0.7% increase.
    "We still have concerns about the Delta variant. We're
worried about future economic growth, so we see yields lower
here," said Stan Shipley, fixed income strategist at Evercore
ISI.
    "It looks like we have made a floor after tumbling from
1.75% in the U.S. 10-year. But it's hard to get very excited
yet. When we were at 1.75%, that bear trade is very crowded and
there are still some people that need to unwind that trade," he
added.
   In midmorning trading, the U.S. 10-year Treasury yield slid
to 1.241% from 1.276% late on Monday.
   U.S. 30-year yields dropped to at 1.892% from
Monday's 1.925%.
    The Treasury is also selling $61 billion in 5-year notes
later on Tuesday.
    Ahead of the auction, U.S. 5-year note yields were down at
0.695%, from Monday's 0.713%.
    Investors are closely watching the 5-year auction for clues
on investor sentiment about Wednesday's Fed statement and the
news briefing by Chairman Jerome Powell.
    The U.S. 5-year note has come to reflect market views on Fed
monetary policy.
    "Outsized strength at the $61 bn offering will be an
endorsement of the new, lower, 5-year yield range and hint of
conviction that the Fed will remain committed to the new
framework and keep policy accommodative for longer," BMO said in
a research note on Tuesday.
    The yield curve, another gauge of risk sentiment, flattened
on Tuesday to 103.4 basis points, as measured by the spread
between 2-year and 10-year yields. The curve had
steepened in the five previous sessions.

      July 27 Tuesday 10:25AM New York / 1425 GMT
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             0.05         0.0507    0.000
 Six-month bills               0.0525       0.0532    0.000
 Two-year note                 99-215/256   0.2055    -0.010
 Three-year note               100-8/256    0.3644    -0.011
 Five-year note                100-218/256  0.6987    -0.014
 Seven-year note               101-176/256  0.9971    -0.028
 10-year note                  103-136/256  1.2411    -0.035
 20-year bond                  107-68/256   1.8116    -0.032
 30-year bond                  110-224/256  1.8956    -0.029

   DOLLAR SWAP SPREADS
                               Last (bps)   Net
                                            Change
                                            (bps)
 U.S. 2-year dollar swap         7.00        -1.50
 spread
 U.S. 3-year dollar swap        11.00         0.00
 spread
 U.S. 5-year dollar swap         9.00         0.25
 spread
 U.S. 10-year dollar swap        0.50         0.50
 spread
 U.S. 30-year dollar swap      -27.50         0.00
 spread


 (Reporting by Gertrude Chavez-Dreyfuss; editing by Jonathan
Oatis)

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