October 28, 2020


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TREASURIES-Yields trading in a tight range ahead of debate, jobs data

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NEW YORK, Sept 29 (Reuters) – U.S. Treasury yields were slightly lower on Tuesday morning,...

NEW YORK, Sept 29 (Reuters) – U.S. Treasury yields were slightly lower on Tuesday morning, trading within a tight range as investors held off from making large moves ahead of presidential debate scheduled for later in the day and employment data to be released on Wednesday and Friday.

The yield on the benchmark 10-year Treasury note has opened or closed within a range of 0.65% to 0.70% for 15 consecutive sessions, said Andrew Brenner, head of international fixed income at NatAlliance Securities. The 10-year yield opened at 0.658% and was last trading slightly lower on the day at 0.654%.

The long bond was also trading within range, down 1.5 basis points at 1.407%. The two-year yield was flat on the day at 0.131%. The anchored two-year yield has pulled the yield curve, as measured by the spread between the two- and 10-year yields, flatter.

A tightening trading range typically indicates that a move is imminent. “Treasuries are poised to make a move,” said Brenner, “These are wound-up in a narrow range.”

But the breakout is unlikely to happen during Tuesday’s session. The presidential debate Tuesday evening could potentially move markets if a poor performance from either candidate changes the electoral calculus. But the low levels of implied volatility suggest the market believes the debate will be a non-event.

“The current backdrop isn’t the setting up for a volatile session today, even if the narrowing range confines suggest a breakout is in the offing,” wrote Ian Lyngen, head of U.S. rates strategy at BMO Capital Markets.

Republican President Donald Trump and his Democratic rival Joe Biden will go head-to-head in their first televised debate on Tuesday evening. With five weeks to go until the Nov. 3 general election, the stakes are high. Trump has recently refused to commit to a peaceful transfer of power if he loses the election to Biden, and has said the Supreme Court may have to declare a winner.

A light schedule of data releases at the start of the week has also kept Treasuries within a tight range. But investors are keeping an eye on private payrolls data to be released on Wednesday morning in the ADP employment report and the government’s closely watched monthly payrolls figures released Friday. (Reporting by Kate Duguid Editing by Nick Zieminski)

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