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U.S. Treasury yields rebounded on Friday as concerns about the impact of rising American coronavirus cases temporarily ebbed, pulling investors into stocks at the expense of government bonds.
Still, the story for the week was that long-term yields fell as investors lowered their growth expectations in the face of an unrelenting pandemic.
What are Treasurys doing?
The 10-year Treasury note yield TMUBMUSD10Y, 0.645% rose 2.8 basis points to 0.633%, a day after closing at its lowest since April 24. Friday’s increase trimmed the benchmark maturity’s weekly rise to 3.7 basis points.
The 2-year note rate TMUBMUSD02Y, 0.164% was virtually unchanged at 0.153%, while the 30-year bond yield TMUBMUSD30Y, 1.334% rose 1. 8 basis points to 1.326%, trimming its weekly drop to 10.5 basis points, its largest such move in a month. 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.
Still, the ascendant momentum in U.S. equities on Friday helped to sap some of the bullish trading in the bond-market, with the S&P 500 SPX, +1.04% and Dow DJIA, +1.43% logging weekly gains.
Aiding the buoyant tone in stocks, Gilead GILD, +2.15% said a new analysis of previously disclosed clinical trial data found its experimental therapy remdesivir could reduce the risk of mortality in COVID-19 patients.
In economic data, U.S. producer prices fell 0.2% in June, leaving it lower 0.8% since last June. Reduced demand has led retailers and businesses to cut the price of goods to draw reluctant consumers, alleviating inflationary pressures.
What did market participants say?
“The bond market generally reads the economy better than the equity market. When you see a grab for yield in the long-end, you know [the bond-market] is concerned” about the rising infections in the U.S., said Tim Magnusson, senior portfolio manager at Garda Capital Partners, in an interview.
