Bond Report: Treasury yields slide as surge in coronavirus cases buoys haven assets

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U.S. Treasury yields fell and prices rose on Thursday after China reported a sharp jump in the confirmed cases and deaths from COVID-19, renewing appetite for government paper which have sold off over the last two sessions.

What are Treasurys doing?

The 10-year Treasury note yield TMUBMUSD10Y, -1.03%   was down 3.5 basis points to 1.592%, while the 2-year note rate TMUBMUSD02Y, -1.40%   edged 2.9 basis points lower to 1.413%. The 30-year bond yield TMUBMUSD03Y, -1.68%   slipped 3.5 basis points to 2.057%. Bond prices move in the opposite direction of yields.

What’s driving Treasurys?

Chinese health officials tweaked how it assessed confirmed cases of the novel coronavirus, resulting in the number of new cases to rise by 15,152, and 254 new deaths. Most of this bump comes from the province of Hubei, which encompasses the city of Wuhan, the reported source of the viral outbreak. The new figures brought total deaths from the outbreak at 1,362, while the total number of confirmed cases of COVID-19 rose to 59,804 in China alone.

COVID-19 case tally: 14 U.S. cases, jump in cases in China after new diagnosis protocol

The sudden increase raises uncertainty about how swiftly Beijing will be able to contain the pathogen’s spread. In the past few days, investors had pointed to the declining number of cases as a case for optimism, but that assumption has been upended by Thursday’s numbers.

Futures for the S&P 500 SPX, +0.65%   and the Dow Jones Industrial Average DJIA, +0.94%   show U.S. equities are poised to retreat from records at the opening bell.

In economic data, January consumer prices rose by a modest 0.1%, but ticked 0.2% higher once the figures were stripped out for food and energy prices. U.S. initial jobless claims for the week ending in Feb. 8 edged up 2,000 to 205,000, underlining the strength of the labor market.

The Treasury Department will auction off its last debt auction of the week, selling $19 billion of 30-year bonds in the afternoon.

As for the Federal Reserve, Judy Shelton will face questions from lawmakers at her confirmation hearing on Thursday before the Senate Banking Committee. The possibility of her appointment has rattled economists who worry that her unconventional views and skepticism of the Fed’s independence from political interference could disrupt the central bank’s workings.

What did market participants’ say?

“A 15,000 person spike in coronavirus infections in Hubei province was more than sufficient to drive a modest global flight-to-quality, pushing 10-year yields back below 1.60%. To be fair, that eye-popping figure is reflective of a methodological shift, not a true daily increase in afflictions, and speaks to the analytical difficulties at the moment of assessing the negative consequences of the virus, if only because of questions related to data quality and consistency,” said Jon Hill, an interest-rates strategist for BMO Capital Markets, in a note.

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