TREASURIES-Yields bounce back after strong demand for notes at auction

 (Recasts based on auction results, updates with market
activity,   gold prices, TIPS, graphics)
    By Ross Kerber
    July 27 (Reuters) - U.S. Treasury yields rose back after
declines on Monday as investors showed continued demand for
notes at auction and prepared for a dovish message from the U.S.
Federal Reserve later this week.
    The benchmark 10-year yield was up one basis
point at 0.5987% in afternoon trading after reaching as low at
0.569% earlier in the session.
    Midday auction results showed the U.S. Treasury sold $48
billion of 2-year notes at a high yield of 0.155%, and sold $49
billion of 5-year notes at a high yield of 0.288%.

    For each note, the auction result was the lowest on record
even as the amounts sold were the largest, said BMO Capital
Markets rates strategist Ben Jeffery. The outcomes showed solid
demand for the securities as Washington leaders try to finish a
new aid plan with jobless benefits set to expire amid the
COVID-19 pandemic.
    "The fact that these auctions are still met with solid
demand, even at such a low yield, is encouraging," he said. "It
means there is still more space for issuance increases if
needed."
    No major announcements are expected at the end of the U.S.
central bank's two-day meeting on Wednesday. But 
analysts foresee policymakers laying the groundwork for weak
economic expectations and more dovish action later this year.
    Investors bought up other safe- haven assets on Monday as
Sino-U.S. tensions rose and coronavirus cases climbed in
southern and western U.S. states. Gold prices soared
to an all-time high on Monday while the U.S. dollar
fell. 
    Yields on 10-year inflation-protected U.S. Treasury bonds
 were at minus 0.913%, on track for a record
closing low. 
    A closely watched part of the U.S. Treasury yield curve
measuring the gap between yields on two- and 10-year Treasury
notes, seen as an indicator of economic
expectations, was at 44 basis points, roughly unchanged since
Friday's close.

 
     July 27 Monday 1:55PM New York / 1755 GMT
                               Price                  
 US T BONDS SEP0               180-31/32    -0-4/32   
 10YR TNotes SEP0              139-128/256  -0-20/25  
                                            6         
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             0.1025       0.1039    -0.005
 Six-month bills               0.13         0.1319    -0.002
 Two-year note                 99-241/256   0.1555    0.006
 Three-year note               99-214/256   0.1805    0.010
 Five-year note                99-216/256   0.282     0.008
 Seven-year note               100-84/256   0.4518    0.007
 10-year note                  100-64/256   0.5987    0.010
 20-year bond                  101-208/256  1.0236    0.000
 30-year bond                  100-92/256   1.2355    -0.003
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap         6.25         0.25    
 spread                                               
 U.S. 3-year dollar swap         4.75         0.00    
 spread                                               
 U.S. 5-year dollar swap         3.25         0.25    
 spread                                               
 U.S. 10-year dollar swap       -0.75         0.25    
 spread                                               
 U.S. 30-year dollar swap      -41.00         1.00    
 spread                                               
                                                      
 
    

    
 (Reporting by Ross Kerber in Boston
Editing by Nick Zieminski)
  

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