TREASURIES-Yields dip after weak U.S. data, ahead of holiday

Kate Duguid
·2-min read

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By Kate Duguid

NEW YORK, Nov 25 (Reuters) - U.S. Treasury yields dipped on Wednesday morning after a slate of weak U.S. data including weekly jobless claims, but the moves were capped by muted market activity heading into the Thanksgiving holiday.

The Labor Department reported on Wednesday that initial claims for state unemployment benefits rose by more than expected to 778,000 in the latest week versus 748,000 in the prior period. The rise suggests the surge in new COVID-19 infections and business restrictions have increased layoffs and are undermining the fragile labor market recovery.

Daily U.S. deaths from COVID-19 surpassed 2,000 for the first time since May and with hospitals across the country already full, portending a surge in mortalities to come.

A separate report on Wednesday showed that U.S. consumer spending increased solidly in October, but the momentum is likely to slow as surging infections and the loss of a weekly unemployment subsidy for millions of Americans weigh on income. Personal income fell 0.7%, reversing a 0.7% gain in September.

Gross domestic product and home sales were also reported Wednesday.

The benchmark 10-year yield fell, last down 1.9 basis point on the day to 0.864%. The two-year yield moved less - last down 0.6 basis point to 0.158%- flattening the yield curve to 70.4 basis points.

"I think a lot of people got ahead of themselves imagining that the recovery was taking shape. To me the recovery isn't taking shape until we have a viable vaccine," said Justin Lederer, Treasury analyst and trader at Cantor Fitzgerald.

Ultimately, however, traders will be holding off from making any large decisions ahead of the Thanksgiving holiday on Thursday.

"I'm under the impression that (Treasury yields) will find a range here," said Lederer.

Later on Wednesday, the Federal Reserve will release minutes from its last policymaking meeting. Investors will be on watch for any suggestions the Fed may considering altering its current purchases of Treasury debt. Some analysts have speculated that the Fed will adjust the overall duration of its Treasury purchases and buy longer-dated debt to prevent yields at the long end of the yield curve from rising. (Reporting by Kate Duguid Editing by Chizu Nomiyama and Jonathan Oatis)