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U.S. Treasury yields fell on Friday as concerns about the impact of rising American coronavirus cases and global equity market jitters supported inflows into government bonds.
What are Treasurys doing?
The 10-year Treasury note yield TMUBMUSD10Y, 0.598% fell 2.1 basis points to 0.584%, a day after closing at its lowest since April 24. The 2-year note rate TMUBMUSD02Y, 0.133% edged 0.6 basis point lower to 0.145%, while the 30-year bond yield TMUBMUSD30Y, 1.283% slipped 4.5 basis points to 1.264%. Bond prices move inversely to yields.
What’s driving Treasurys?
New coronavirus cases in the U.S. rose by more than 63,000, another single-day record, on Thursday. California, Florida and Texas, states which combined contribute to more than a quarter of the U.S.’s annual economic output, reported their largest daily increase in deaths since the coronavirus crisis began.
This week’s round of U.S. Treasury auctions demonstrated the strong demand for safe assets, amid worries that the COVID-19 pandemic is stalling what had been a speedy economic recovery after lockdowns were eased.
Global equity markets shed some of their upward momentum on Friday, with futures for the S&P 500 SPX, -0.56% and Dow DJIA, -1.38% pointing to a lower open for Wall Street. China’s benchmark equity index CSI 300 000300, -1.81% lost 1.8% after state-owned investment funds cut back on their holdings of Chinese stocks, according to filings. The subdued tone in risk assets supported overnight buying of government bonds.
In economic data, U.S. producer prices fell 0.2% in June.
What did market participants say?
“Long [Treasury] yields had little trouble falling through the bottom of their ranges this week because i) the pandemic so obviously survived lockdowns, and ii) monetary stimulus is most effective when it is announced. That leaves fiscal/government policy and personal discipline as the tools to fight the economic impact of the plague for the next 3 to 4 months,” wrote Jim Vogel, an interest-rate strategist at FHN Financial.
“The odds of successful implementation of government action and personal responsibility are always lower than the short-term effectiveness of central bank balance sheets,” said Vogel.
