TREASURIES-U.S. Treasury yields climb as market awaits stimulus guidance

(Recasts, updates yields, adds analyst comment, 10-year note auction) CHICAGO, March 11 - U.S. Treasury yields rose in choppy trading on Wednesday despite losses in stocks that deepened after the World Health Organization classified the coronavirus outbreak as a pandemic. The 10-year note yield was last at 0.814%, up from 0.752% at Tuesday's close. "The (Treasury) market is just a complete mess right now," said Thomas Simons, senior money market economist at Jefferies in New York. He said both the stock and Treasuries markets were waiting for U.S. government guidance on measures "to soften the blow from the virus as far as the economy is concerned." The White House is examining tax relief measures, loan guarantees, reimbursing workers for lost pay, aid to small and midsize businesses, and support for airlines, hotels and other travel businesses, Treasury Secretary Steven Mnuchin told lawmakers on Wednesday. The Treasury sold $24 billion of 10-year notes on Wednesday into average demand, following Tuesday's weak $38 billion auction of three-year notes. After falling to a record low 0.318% on Monday, the 10-year Treasury yields rose as high as 0.862% heading into the auction. "When you have that kind of volatility it's extraordinarily difficult to price," Simons said. Some investors are growing concerned about liquidity disruptions in the Treasury market given recent large shifts in yields. "It's conditional. If you get a couple days where things calm down because there's no fresh news and we don't get big swings, then the volume kind of comes back and the bids and offers tighten up," said Lou Brien, a strategist at DRW Trading in Chicago. The yield curve between three-month bills and 10-year notes steepened as far as 42 basis points on Wednesday, after briefly inverting on Monday. An inversion is a bearish signal for the economy. The curve has since steepened on anticipation that the Federal Reserve will cut rates to zero and launch new quantitative easing to offset the economic impact of the coronavirus. Treasuries were little changed after the U.S. Labor Department reported its consumer price index unexpectedly increased 0.1% last month, as rising food and accommodation costs offset cheaper gasoline. After boosting its limit on daily cash injections earlier this week, the New York Federal Reserve on Wednesday accepted all of the $132.38 billion in bids from primary dealers at an overnight repurchase agreement (repo) operation. It was the largest amount since the liquidity operations began in September. March 11 Wednesday 2:21PM New York / 1921 GMT Price Current Net Yield % Change (bps) Three-month bills 0.425 0.4325 0.007 Six-month bills 0.39 0.3973 -0.022 Two-year note 101-64/256 0.4858 -0.001 Three-year note 99-192/256 0.5843 0.028 Five-year note 102-72/256 0.6574 0.042 Seven-year note 102-76/256 0.7856 0.065 10-year note 106-136/256 0.8139 0.062 30-year bond 116-224/256 1.316 0.083 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap -0.75 -4.75 spread U.S. 3-year dollar swap -5.50 -5.75 spread U.S. 5-year dollar swap 0.00 -5.00 spread U.S. 10-year dollar swap -0.50 -3.75 spread U.S. 30-year dollar swap -48.25 -6.75 spread (By Karen Pierog in Chicago and Karen Brettell in New York Editing by Paul Simao and Tom Brown)