Bond Report: 30-year Treasury yield falls to two-week low as coronavirus disrupts supply chains

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U.S. Treasury yields declined on Tuesday after investors saw how the COVID-19 epidemic was preventing companies from restoring production to full-capacity after the Chinese Lunar New Year holidays, as the viral outbreak keeps workers at home and away from factories.

What are Treasurys doing?

The 10-year Treasury note yield TMUBMUSD10Y, -1.93%   slumped 3.2 basis points to 1.555%, while the 2-year note rate TMUBMUSD02Y, -0.86%   was down 1.4 basis points to 1.410%. The 30-year bond yield TMUBMUSD30Y, -1.49%   slipped 3.7 basis points to a two-week low of 2.006%, briefly dipping below the key 2% level earlier in the session.

What’s driving Treasurys?

U.S. investors received one of the first indications of how the coronavirus could upend global supply chains, after Apple Inc. AAPL, -1.83%   said it would not be able to meet second-quarter guidance due to the outbreak. In a statement, the iPhone maker said it could take longer than expected for production to return to normal conditions.

Provincial and local government officials across China have ordered factories to remain closed even though many workplaces were supposed to reopen on Feb. 10, at the end of the Lunar New Year holiday.

See: Apple’s coronavirus warning wasn’t a total surprise, but magnitude rattles Wall Street

In U.S. economic data, the Federal Reserve’s Empire State manufacturing survey for February came in at 12.9, a sharp jump from the 4.8 reading last month. Meanwhile, this month’s NAHB housing market index edged down to 74, from 75 in January.

Later, the U.S. Treasury International Capital Report will give a glimpse of the investment activity of foreign investors, a significant buyer base of the U.S. government bond market.

Check out: Away from S&P 500 and other top indexes, markets are behaving as if it’s late in the cycle: Morgan Stanley strategist

What did market participants’ say?

“Apple’s announcement about missing guidance indicates that corporate America is beginning to feel that [the coronavirus] is something that may be more than a temporary setback to a very powerful engine,” wrote Kevin Giddis, chief fixed-income strategist for Raymond James.

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