US Bond Returns Are Stable As COVID Concerns Increase; new auctions

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By Karen Brettell

NEW YORK, Nov 15 (Reuters) – Treasury bond returns were stable on Monday as investors weighed concerns about a rising rate of COVID-19 infections against new debt supply this week and the likely effects of the reduction of its purchases by the Federal Reserve.

* Austria imposed a lockdown on people not vaccinated against the coronavirus on Monday, ahead of winter, and as infections increase in Europe. Any new shutdown in the United States is likely to hurt economic growth and increase demand for the security of US debt.

* At the same time, corporate issuance is likely to rise as companies rush to sell debt before the holiday season, a factor that could boost yields, analysts say. This week, the Treasury will sell $ 23 billion in new 20-year bonds, after seeing very weak demand for a $ 25 billion 30-year auction last week.

* The Fed is also beginning to downsize its gigantic bond buying program, which analysts hope will help drive returns up.

* Yields on benchmark 10-year debt were trading at 1.60% and are up from a one-month low of 1.42% posted last Tuesday.

* The 20-year profitability remained above that offered at 30 years, since the term continues to suffer a relatively lower demand than other maturities. The 20-year rate operated at 2.00%, while the 30-year rate reached 1.98%.

* The Treasury said this month it would cut 7 and 20-year debt issuance at a faster rate than other terms next quarter to address structural imbalances in supply and demand on these maturities.

* The government will also sell $ 14 billion in 10-year Treasury Inflation Protected Securities (TIPS) on Thursday.

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