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Long-dated Treasury yields posted their steepest yield slide in months as concerns about a lack of fresh fiscal stimulus, rising COVID-19 cases and business restrictions gave rise to bond buying on Wall Street, sending prices higher and rates lower.
How are Treasurys performing?
- The 10-year Treasury note yield TMUBMUSD10Y, 0.829% was 2.6 basis points lower at 0.828%.
- The 30-year Treasury bond yield TMUBMUSD30Y, 1.522% was at 1.531%, off 4.6 basis points.
- The 2-year Treasury note TMUBMUSD02Y, 0.157% rate was at 0.161%, down 0.8 basis point.
For the week, the 10-year note shed 8.28 basis points to mark the largest weekly drop since Aug. 21; the 30-year long bond lost 11.8 basis points for its sharpest weekly yield slump since June 12; while the 2-year note gave up 16.1 basis points for its firmest weekly rate fall since Sept. 11.
Bond prices rise as yields fall.
What’s driving the bond market?
Fears among bond buyers that the market may not soon see a coronavirus aid package resurfaced on Friday, after the market read an apparent rift between the Federal Reserve and Treasury as signaling a lack of urgency to direct more funds to troubled areas of the market and economy.
Late Thursday, Treasury Secretary Steven Mnuchin said he wouldn’t approve the extension of several emergency loan programs that were set up in conjunction with the Fed in March and April, during the worst days of the financial turmoil created by the pandemic.
On Friday, Mnuchin, during an interview on CNBC, Mnuchin said the intent in pulling the plug on funding was to re-appropriate the funds to stimulus efforts and played down the fissure between Treasury and the Fed.
Mnuchin said his decision freed $500 billion for Congress to use “that won’t cost taxpayers any more money.”
“We’re not trying to hinder anything. We’re following the law,” Mnuchin said in an interview on CNBC.
Read: Mnuchin pulls plug on Fed loan programs
Earlier, in a separate interview, Chicago Fed President Charles Evans said the lending programs played an important backstop role for financial markets that might be important going forward and the decision to end them was disappointing.
Concerns about aid for businesses and workers come amid flare-ups in cases of COVID-19 that threaten to delay a market recovery, or intensify a further slide, supporting buying in Treasurys, strategists said.
The global case tally for the coronavirus illness COVID-19 climbed above 57 million on Friday, and the U.S. moved closer to 200,000 cases in a day and set a fresh record for hospitalizations as the virus continues to infect people in every state and region.
Concerns about the outlook for stocks and the economy, and investor positioning heading into the Thanksgiving holiday next week, helped to drive most major equity benchmarks lower on the week and day Friday.
What are fixed-income participants saying?
“Treasury prices rose as the Congress continues to delay more
fiscal stimulus,” wrote Tom di Galoma, managing director of Treasurys trading at Seaport Global Securities, in a Friday note.
“We still look for 10-year yields to trade between 0.95% to 0.75% going into year-end,” he said.
“The opposing stances of Mnuchin and Powell on the extension of ‘the full suite’ of bailout facilities has become the market’s primary focus as the weekend quickly approaches,” wrote BMO Capital Markets fixed-income rates strategists Ian Lyngen and Benjamin Jeffery, in a Friday research report.
