TREASURIES-Yields dip on COVID concerns, Fed on track to trim bond purchases

       By Karen Brettell
    NEW YORK, Aug 19 (Reuters) - U.S. Treasury yields fell on
Thursday as risk appetite shrank on concerns about the spread of
COVID variants, and a day after the Federal Reserve said it
expects to begin paring bond purchases this year.
    Stocks opened lower on Thursday, which helped to boost
demand for safe haven U.S. bonds.
    "I think for the most part what we are seeing now is a
reaction to concerns about the Delta variant (and) the after
effects of that sort of shocking consumer sentiment report that
we got this past Friday," said Kevin Flanagan, head of fixed
income strategy at WisdomTree.
    Data on Friday showed that U.S. consumer sentiment dropped
in early August to its lowest level in a decade as Americans
gave faltering outlooks on everything from personal finances to
inflation and employment.
    Yields are also holding at historically low levels even as
the Fed appears on track to reduce bond purchases in the coming
    Minutes from the Fed's July meeting released on Wednesday
showed that the bulk of the U.S. central bank's policy-setting
committee is coalescing around a plan that would see the Fed
start trimming its bond-buying program later this year, though
policymakers remained somewhat at odds over how fast to taper
the asset purchases.
    "The reaction, or the lack thereof, in the Treasury market
is distinctly different from where we were in 2013, it appears
that there won't be any kind of taper tantrum," said Flanagan,
adding that he nonetheless expects yields to rise in the coming
months as the economy continues to recover and with inflation
likely to hold above the Fed's 2% annual target.
    Benchmark 10-year yields dipped three basis
points to 1.247%. They fell to 1.127% earlier this month, which
was the lowest since February.
    Investors will be watching a speech by Fed Chair Jerome
Powell in Jackson Hole next week for any indications on when the
taper will be announced.
    Data on Thursday showed that the number of Americans filing
new claims for unemployment benefits fell to a 17-month low last
week, pointing to another month of robust job growth, though
surging COVID-19 infections pose a risk to the labor market
    The Treasury will sell $8 billion in 30-year Treasury
Inflation-Protected Securities (TIPS) on Thursday.

    August 19 Thursday 9:47AM New York / 1347 GMT
                               Price        Current   Net
                                            Yield %   Change
 Three-month bills             0.0575       0.0583    -0.003
 Six-month bills               0.05         0.0507    0.000
 Two-year note                 99-211/256   0.2156    -0.003
 Three-year note               99-220/256   0.4224    -0.011
 Five-year note                99-88/256    0.7604    -0.018
 Seven-year note               99-200/256   1.0327    -0.021
 10-year note                  100-8/256    1.2467    -0.026
 20-year bond                  99-48/256    1.7986    -0.037
 30-year bond                  102-188/256  1.8803    -0.033

                               Last (bps)   Net
 U.S. 2-year dollar swap         9.00        -0.25
 U.S. 3-year dollar swap        10.25         0.00
 U.S. 5-year dollar swap         8.25         0.00
 U.S. 10-year dollar swap        1.00         0.00
 U.S. 30-year dollar swap      -28.25         0.25

 (Editing by Barbara Lewis)

Copyright © Reuters 2008. All rights reserved. Republication or redistribution of Reuters content, including by caching, framing or similar means, is expressly prohibited without the prior written consent of Reuters. Reuters and the Reuters sphere logo are registered trademarks and trademarks of the Reuters group of companies around the world.

News, commentary and research reports are from third-party sources unaffiliated with Fidelity. Fidelity does not endorse or adopt their content. Fidelity makes no guarantees that information supplied is accurate, complete, or timely, and does not provide any warranties regarding results obtained from their use.