Bond Report: Treasury yields edge lower as coronavirus cases rise and after auction of 20-year bonds

Treasury yields on Wednesday fell and prices rose amid heightened concerns around the COVID-19 pandemic, and as a Wednesday auction for government debt proved successful, nudging yields lower.

What are Treasurys doing?

The 10-year Treasury note yield TMUBMUSD10Y, 0.705% fell 2.2 basis points to 0.732%, while the 2-year note rate TMUBMUSD02Y, 0.189% edged 0.8 basis point down to 0.195%. The 30-year bond yield TMUBMUSD30Y, 1.481% slipped 1.5 basis points to 1.523%.

What’s driving Treasurys?

An auction for $17 billion of 20-year notes TMUBMUSD20Y, 1.247% in the afternoon stopped through by 1.6 basis points, a sign of a successful sale. A stop-through indicates the difference between the highest yield the Treasury offered in the auction and the highest yield expected when the auction began. The 20-year note yield was down 3 basis points to 1.29%.

Investors also remain focused on U.S. efforts to reopen the economy amid signs that several states, such as Texas, Arizona and Florida, are seeing a record increase in new COVID-19 infections and hospitalizations. The U.S. now has more than 2.1 million confirmed cases and close to 117,000 deaths, according to data compiled by Johns Hopkins University.

Meanwhile, Beijing is moving quickly to combat an outbreak of the epidemic. Those efforts come amid some signs of rising tensions in Asia, including those between South Korea and North Korea and India and China, whose troops sparred between their respective borders.

See: Coronavirus update: Global case tally tops 8 million and states reopen businesses even as infections and hospitalizations rise

Separately, Federal Reserve Chairman Jerome Powell called for additional fiscal stimulus to bolster the economy during Wednesday testimony with the House Banking Committee, in the final of two days of hearings about the health of the U.S. economy in front of Congress. On Tuesday, he said that the central bank had no intention of running through the bond-market “like an elephant,” disappointing some who saw the Fed’s decision to start buying individual corporate bonds as part of steps toward speeding up its purchases of corporate debt.

In economic reports, May housing starts climbed to an annual rate of 974,000 last month from a five-year low of 934,000 in April, the Commerce Department said. Permits to build new houses jumped 14.4 % to a 1.22 million annual pace.

What did market participants’ say?

“How things evolve in the second half [of the year] will largely depend on the virus in our opinion. If the virus remains under control and we don’t move back to a situation that we had in April and May, all signs point to a continued recovery in the economy,” said Gregory Faranello, head of U.S. rates at AmeriVet Securities.

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