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U.S. Treasury prices rose Friday, dragging down yields, as investors showed interest in safe assets as prospects for another round of aid spending by the U.S. government faded and the potential for a “no-deal Brexit” loomed larger.
What did yields do?
The yield on the 10-year Treasury note TMUBMUSD10Y, 0.888% fell 1.5 basis points to 0.892%, leaving the benchmark down 7.5 basis points for the week, it’s largest such decline since June, according to Dow Jones Market Data.
The 2-year yield TMUBMUSD02Y, 0.117% fell 1.2 basis points to 0.121%, and declined 3 basis points for the week. The 30-year Treasury bond yield TMUBMUSD30Y, 1.622% declined 1 basis points to 1.626%, contributing to a weekly fall of 10.2 basis points.
What drove the market?
Treasurys found buying interest as stocks put in a mixed performance, leaving manor benchmarks on track for weekly declines.
Analysts said frustration over the lack of a deal in Congress on coronavirus aid was among factors damping the tone on Wall Street. While House Speaker Nancy Pelosi, D-Calif., and Treasury Secretary Steven Mnuchin have sounded upbeat on negotiations around a bipartisan package of just less than $1 trillion, staff for Senate Majority Leader Mitch McConnell, R-Ky., has told congressional leaders that the package would be unlikely to satisfy Senate Republicans.
Meanwhile, both U.K. Prime Minister Boris Johnson and European Commission President Ursula von der Leyen have signaled a lack of progress in trade talks that could result in a “no-deal” Brexit when the U.K. leaves the European single market at the end of the year.
Optimism over progress toward a coronavirus vaccine rollout have contributed to sharp gains for equities and other assets viewed as risky since last month.
The vaccine developed by Pfizer Inc. PFE, -1.49% and BioNTech SE BNTX, -1.73% was rolled out in the U.K. earlier this week, while the Food and Drug Administration was seen moving toward emergency authorization of the vaccine after an advisory panel voted that benefits of the drug outweighed the risk.
However, COVID-19 cases continue to surge, resulting in increased restrictions on activity. The U.S. tallied 223,570 new cases on Thursday, and at least 2,923 people died, according to a New York Times tracker. In the last week, the U.S. has averaged 211,127 cases a day. There was a record of 107,258 COVID-19 patients in U.S. hospitals on Thursday, according to the COVID Tracking Project, topping the record of 106,705 set a day earlier.
Treasury prices held their bid after data showed U.S. producer prices rose 0.3% last month, slightly more than the 0.2% forecast produced by a MarketWatch survey of analysts.
What did analysts say?
“News headlines are disappointing enough to pause global credit tightening for the first time in a month and a half. More Brexit snags and constant Washington snafus have not been enough, however, to stop the march higher in U.S. inflation expectations,” said Jim Vogel, executive vice president at FHN Financial, in a note.
