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U.S. Treasury yields extended their rise on Tuesday as the bond-market sold off in the wake of signs the spread of the COVID-19 pandemic may be slowing in Europe and Asia in particular, encouraging investors back into equity markets this week at the expense of haven assets.
What are Treasurys doing?
The 10-year Treasury note yield TMUBMUSD10Y, 0.748% climbed 6.9 basis points to 0.747%, while the 2-year note rate TMUBMUSD02Y, 0.299% was up 2.2 basis points to 0.290%. The 30-year bond yield TMUBMUSD30Y, 1.364% rose 6.9 basis points to 1.354%.
What’s driving Treasurys?
A back-to-back rally in U.S. stocks this week was dampening demand for haven assets like government paper amid hopes that the U.S. and some Western European nations were making inroads into containing the COVID-19 disease. Futures for the S&P 500 SPX, +7.03% implied a higher open for Wall Street on Tuesday.
However, the number of confirmed cases of COVID-19 rose to more than 1.35 million, spreading across more than 100 countries, while deaths topped 74,800, according to data aggregated by Johns Hopkins University. There are more than 368,000 confirmed cases in the U.S. and almost 11,000 deaths.
Also weighing on the bond-market, an auction for $25 billion of 10-year notes on Tuesday and $17 billion of 30-year bonds on Wednesday were causing broker-dealers to price in a “concession,” a process whereby they will push yields higher in order to ensure a successful auction.
Yet analysts say the Fed’s continued asset purchases will continue to offer support for traders and broker-dealers who want to off-load their holdings of government paper.
In economic data, the NFIB survey, a monthly snapshot of small businesses in the U.S., found that its optimism index fell in March to 96.4, an 8.1-point decline and the largest monthly decline in the survey’s history.
The Job Openings and Labor Turnover Survey for February will be published at 10 a.m. ET, but will not reflect the impact of the coronavirus on hiring.
What did market participants’ say?
“Treasurys have been weighed down by a continued global ‘risk-on’ tone with coronavirus headlines (Italy potentially reducing lock-down measures in early May) and ahead of the long-end Treasury supply today and tomorrow,” said Justin Lederer, a Treasury market analyst at Cantor Fitzgerald.
