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Treasury prices rose and yields looked set to extend a slide to a fourth day on Wednesday as worries about a resurgence of COVID in Europe fueled buying of sovereign debt, pushing prices up and rates lower.
Investors also were watching for a parade of Federal Reserve speakers, including Chairman Jerome Powell, who will deliver a second day of congressional testimony, this time in front of the Senate Banking Committee, alongside Treasury Secretary Janet Yellen, about the economy’s rebound from the COVID-19 pandemic.
How are Treasurys performing?
-
The 10-year Treasury note yield
TMUBMUSD10Y,
1.634%
was at 1.624%, off 1.4 basis points. The benchmark bond ended last week at 1.729% but has slipped for four straight days thus far. -
The 30-year Treasury bond
TMUBMUSD20Y,
2.242%
was yielding 2.330%, down 1.8 basis points, compared with 2.348% a day ago. -
The 2-year Treasury note
TMUBMUSD02Y,
0.148%
was at 0.148%, versus 0.147% on Tuesday.
Bond prices rise as yield fall.
What’s driving fixed-income trading?
Extended lockdowns in Germany and the Netherlands have driven appetite for government bonds, dragging yields south so far this week.
Germany has extended its coronavirus lockdown to April 18 as Europe experiences what some have described as a “third wave” of the deadly COVID-19 infection.
Worries about the impact on the economic outlook has driven buying of government debt, with the 10-year German bond
TMBMKDE-10Y,
falling to a yield of minus 0.357%, its lowest in about five weeks. Lower yields abroad have only helped to spur buying in U.S. debt, which is offering comparatively higher rates.
Still, IHS Markit’s “flash” composite, or preliminary, purchasing managers index rose to 52.5 in March, compared with 48.8 in February, breaching the 50 mark that is seen as a dividing line between contraction and growth.
A reading of the U.S.’s flash PMI is due at 9:45. a.m. Eastern
Meanwhile, Powell and Yellen’s second day of testimony will take place at 10 a.m. Eastern in front of the Senate Banking Committee, a day after Powell told a House committee that the Fed will continue to support the economy until the recovery is more robust, while he played down concerns about out-of-control inflation. The Fed boss emphasized that policy makers could act to tamp down rising price pressures if the economy runs hot.
Investors will look out for insights from other Fed speakers, including Atlanta Fed President Raphael Bostic, who told The Wall Street Journal in an interview published on Wednesday that he expects the central bank to start lifting its interest rates in 2023.
Bostic said the Fed would need to see a sustained period of “strong and robust” inflation for it to lift its rates.
In other economic reports, a reading on U.S. durable goods orders disappointed, dropping 1.1% in February.
What are strategists saying?
“Inflation was a principal topic when Treasury Secretary Yellen and Chair Powell testified in the House yesterday. Neither saw sustained price growth arising directly from current government stimulus. Investors are gradually moving toward that fundamental conclusion as well with two big questions yet to be answered,” wrote Jim Vogel, executive vice president at FHN Financial, in a note.
“First, is ‘temporary’ inflation near 2.5% defined as running for no more than two years or no more than five years? Treasuries are still priced for the additional 3-4 year timetable [2026] to get inflation lower again,” he wrote.
