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TREASURIES-Yields higher as investors weigh U.S. pandemic response

By Ross Kerber

(Updates with market action) By Ross Kerber BOSTON, March 18 (Reuters) - U.S. Treasury yields swung higher on Wednesday as investors watched for the U.S. response to the coronavirus pandemic to take shape. The benchmark 10-year yield was up 9.4 basis points at 1.0897% in morning trading, after reaching above 1.22% and then sinking below 1% during the session. Stan Shipley, macro research analyst for Evercore ISI, said many traders do not know what to do as they sort out various moves by central banks and the Trump administration responding to the health emergency and shoring up the economy. "Yields are very volatile right now. There's a lot of technical issues going on, he said. With the Federal Reserve having already lowered its target interest rates close to zero, the next step should be a massive U.S. spending plan, he said. "We need a big fiscal package, over $1.5 trillion, it could be $2 trillion." The two-year U.S. Treasury yield, which typically moves in step with interest rate expectations, was up less than a basis point at 0.4696% in morning trading. The U.S. yield curve, measured as the difference between the yields on two- and 10-year Treasury notes, was at 61.42 basis points, up 4.90 from Tuesday's close and at its highest levels since early 2018. Cases of the respiratory illness have been reported in all 50 U.S. states and millions of Americans are staying home from work. In response the Trump administration on Tuesday pressed for a $1 trillion stimulus package, possibly to include $1,000 direct payments to individual Americans. For its part, the Fed on Tuesday said it would reopen the so-called Commercial Paper Funding Facility to underwrite the short-term loans that companies often use to pay for their operations, a key financial market backstop first set up 2007 to 2009. It also extended its reach as the economy's lender of last resort to the two dozen Wall Street primary dealers, by letting them pledge municipal bonds, corporate debt and equity securities as collateral for 90-day Fed loans in order to keep credit flowing. In addition, the New York Fed said it will make up to $1 trillion a day available for loans in the repurchase agreement (repo) market for the remainder of this week. On Wednesday morning, the New York Fed said it accepted $85.8 billion in overnight repo bids from primary dealers. March 18 Wednesday 11:15AM New York / 1515 GMT Price Current Net Yield % Change (bps) Three-month bills 0.02 0.0203 -0.188 Six-month bills 0.155 0.1573 -0.082 Two-year note 101-69/256 0.4696 0.009 Three-year note 99-208/256 0.5633 0.021 Five-year note 102-30/256 0.6891 0.039 Seven-year note 101-12/256 0.9688 0.075 10-year note 103-216/256 1.0897 0.094 30-year bond 106-152/256 1.7172 0.137 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 7.50 0.75 spread U.S. 3-year dollar swap 2.25 -0.75 spread U.S. 5-year dollar swap 3.25 -3.25 spread U.S. 10-year dollar swap -12.25 -6.00 spread U.S. 30-year dollar swap -72.00 -7.75 spread (Reporting by Ross Kerber Editing by Nick Zieminski)