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Treasury yields edged higher early Tuesday as another U.S. coronavirus aid package signed by President Trump late Sunday, following a Brexit trade deal last week, continued to bolster risk assets at the expense of government bonds.
What are Treasurys doing?
The 10-year Treasury note yield TMUBMUSD10Y, 0.946% rose 1.5 basis points to 0.948%, while the 2-year note rate TMUBMUSD02Y, 0.125% was down 0.4 basis point to 0.129%. The 30-year bond yield TMUBMUSD30Y, 1.689% added 2.6 basis points to 1.695%. Bond prices move in the opposite direction of yields.
What’s driving Treasurys?
Investors were positive heading into the end of the year as confirmation of a U.S. $900 billion COVID-19 pandemic relief bill, and a Brexit trade deal, added clarity to next year’s economic outlook, already brightened by the prospect of mass vaccination across much of the world.
U.S. equity futures were set to open higher on Tuesday , while U.K. stock markets were having their first trading session since the Brexit deal. The London’s FTSE 100 UKX, +2.04% is up over 2%.
Investors are also eyeing the possibility of $2,000 stimulus checks after the House passed a measure that would boost the size of direct payments to American households, but it’s expected the measure will not receive the support of Senate Republicans.
The last debt auction of the week will be held Tuesday afternoon, with the Treasury Department selling $59 billion of 7-year notes, an increase of $3 billion from last month.
What did market participants say?
The stimulus deal and Brexit trade agreement “arrived just in time to ensure a smooth passage to the end of an extraordinary year and promises a positive handover for 2021,” said Kenneth Broux, an analyst at Société Générale.
