This post was originally published on this site
U.S. Treasury yields bounced back on Thursday after investors digested a round of government bond issuance and what is expected to be one of the largest investment-grade corporate debt deals in history.
What are Treasurys doing?
The 10-year Treasury note yield TMUBMUSD10Y, 1.525% was up 0.8 basis point to 1.528%, after falling as low as 1.475% on the day, while the 2-year note TMUBMUSD02Y, 0.140% was down 1.2 basis points to 0.145%. The 30-year bond yield TMUBMUSD30Y, 2.282% climbed 4.6 points to 2.288%.
What’s driving Treasurys?
The U.S. Treasury Department auctioned off $24 billion of 30-year bonds on Thursday afternoon, with investors taking down the sale with ease. Earlier, investors were concerned inflation fears could sap the attractiveness of the longer-dated bond, considered the maturity in the Treasury market most vulnerable to expectations around price pressures.
Adding to the wave of supply, Verizon is launching a sale of corporate bonds to finance purchases of licenses to use certain airwaves, as part of the telecoms company’s efforts to strengthen its 5G network.
Read: Verizon sees some $100 billion worth of orders pile into massive debt deal
Banks tasked with selling corporate bonds will temporarily short long-term Treasury futures to offset the risk that interest rates will rise and weigh on the prices of the debt during the issuance process.
In Europe, the European Central Bank said it would continue to buy bonds as necessary to prevent financial conditions from tightening and jeopardizing the eurozone’s recovery during the pandemic. Perhaps more important, the ECB said it would step up the pace of purchases in the next quarter, a comment that analysts underlines the dovish tone of the ECB policy update.
See: The ECB just fired back against rising bond yields, catching traders off guard
ECB President Christine Lagarde said higher rates for government bonds could pose a risk to its accommodative policies.
The 10-year German government bond yield TMBMKDE-10Y, -0.332% slid 2 basis points to negative 0.33%.
Read: The ECB just fired back against rising bond yields, catching traders off guard
In U.S. economic data, weekly initial jobless claims came in at 712,000, down from 754,000. Meanwhile, the Labor Department’s job openings and labor turnover survey showed vacancies rising to 6.9 million in February, up from the previous month’s 6.6 million.
What did market participants say?
“The way things have been going, rates can go much higher,” said Sal Naro, a portfolio manager at Lazard Asset Management, in an interview, adding that he didn’t see a reason why the 10-year Treasury note could not return to pre-2020 levels.
