(Updates with market activity, analyst comment) By Ross Kerber BOSTON, March 30 (Reuters) - Longer-term U.S. Treasury yields recovered from lows in late trading on Monday as investors looked to some positive healthcare news and took signs from a stock market rally. The benchmark 10-year yield was down 1.8 basis points at 0.7264% late on Monday after dropping as low as 0.599% in morning trading. Yields on shorter-term treasuries did not recover as much however. A closely watched part of the U.S. yield curve, the gap between the two-year and 10-year notes, stood near 49 basis points, up six basis points from its close on Friday and in line with its level of last week. The re-embrace of risk by some investors on Monday came as central banks and the United States try to contain damage from the rapidly spreading coronavirus that has upended the global economy. In one sign seen as positive, the U.S. government cut deals with Johnson & Johnson and Moderna Inc MRNA.O and said it was in talks with at least two other companies to prepare them to produce massive quantities of coronavirus vaccines. Jim Barnes, director of fixed income at Bryn Mawr Trust, said Monday's trading seemed to reflect that news as well as rising stock markets, a traditional dynamic that seemed paused during earlier points of trading. "It does seem like there is more optimism," he said. U.S. stocks rose on Monday, led in part by healthcare shares. Still, the results of several short-term Treasury auctions earlier in the day showed investors continue to worry about the pandemic and whether governments are responding appropriately, said Kim Rupert, senior economist for Action Economics. "There are a ton of bills and people still want more, because next to cash it's the most liquid thing you can purchase," Rupert said. The two-year U.S. Treasury yield, which typically moves in step with interest rate expectations, was down 3.1 basis points at 0.23% in afternoon trading. The yield on the three-month U.S. Treasury bill was up 4.3 basis points at 0.0585%, after temporarily turning negative overnight. March 30 Monday 5:07PM New York / 2107 GMT Price US T BONDS JUN0 179-1/32 -0-1/32 10YR TNotes JUN0 138-104/256 0-36/256 Price Current Net Yield % Change (bps) Three-month bills 0.0575 0.0585 0.043 Six-month bills 0.08 0.0811 0.056 Two-year note 100-74/256 0.23 -0.031 Three-year note 100-152/256 0.2981 -0.011 Five-year note 100-106/256 0.4162 -0.008 Seven-year note 100-60/256 0.5908 -0.028 10-year note 107-92/256 0.7264 -0.018 30-year bond 116-56/256 1.3395 0.004 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 26.25 2.00 spread U.S. 3-year dollar swap 17.25 1.25 spread U.S. 5-year dollar swap 12.00 2.75 spread U.S. 10-year dollar swap -0.50 6.25 spread U.S. 30-year dollar swap -49.00 5.00 spread (Reporting by Ross Kerber Editing by Nick Zieminski, Sonya Hepinstall and Tom Brown)
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