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Treasury yields slide, to lows not seen in about a week as COVID-19 cases rise

Yields on US government debt fell sharply Friday morning to close the final week of November trading ahead of the Thanksgiving holiday. Bonds have rallied amid reports of new lockdowns in Europe to help mitigate the spread of COVID-19.

What is the yield doing?
  • 10-year Treasury bond
    TMUBMUSD10Y,
    1.537%

    yield 1.544%, down from 1.586% as of 3 p.m. Eastern Time on Thursday.

  • 30 years treasury
    TMUBMUSD30Y,
    1.918%
    ,
    so-called long bonds, have a yield of 1.929%, compared with 1.971% a day ago.

  • Rates of 2-year Treasury bonds
    TMUBMUSD02Y,
    0.472%

    at 0.456%, down from 0.50% on Thursday.

  • For the week, the 10-year Treasury fell 3.9 basis points early Friday, bringing it to its lowest yield since Nov. 9; 2-year bonds fell 6.6 basis points; while the 30-year bond fell 2.6 basis points.

What drives the market?

Rising Covid cases in the US and lockdowns in several countries in Europe are causing some flight to the perceived safe level of government debt on Friday, sending yields lower and prices higher .

Reports indicate that the United States has seen an increase in cases in the Upper Midwest, with a busy travel season set to kick off ahead of the Thanksgiving holiday next Thursday.

Meanwhile, German Health Minister Jens Spahn was reported to say Friday that shutdowns in his country cannot be ruled out, with cases rising sharply this week in Germany and Austria, as the Austrian government nationwide lockdown notice starting Monday for up to 20 days, including vaccinated and unvaccinated people.

Meanwhile, a measure of German wholesale inflation rose 3.8%, compared with a forecast of 2.3%. Manufacturer’s inflation move on an annualized basis increased to 18.4%, beating economists’ average estimate of 15.7%.

Against this backdrop, European Central Bank leader Christine Lagarde reiterated the commitment of European policymakers that they will maintain accommodative monetary policies as the global economy struggles with soaring prices and uneven recovery from the COVID-19 pandemic.

Still, Lagarde repeated the view that rising inflation in most countries around the world could be a fleeting phenomenon.

“Today, I would argue that those dynamics are likely to fade over the medium term, which is an important horizon for monetary policy. And, because they are largely driven by energy supply and prices, they are likely to slow the pace of recovery in the near term,” she said, in a speech at 1.NS European Banking Congress Frankfurt.

In the US, analysts attribute the drop in bond yields this week to technical factors, with Treasuries rebounding after being significantly oversold amid warmer US October. expected last week. Read consumer price index, like Germany, emphasizes a significant increase in inflation.

Separately, the market is waiting for President Joe Biden to finalize his decision on the nomination of Federal Reserve Chair, with current Chairman Jerome Powell in the race against Fed Governor Lael Brainard to help. lead the economy out of the current recovery phase from the pandemic.

What are analysts saying?

“This [lockdown] reports have caused a ‘flight to quality’ for core markets
when European stocks went from positive to negative. Core and
Semi-core yield fell 5% while 10-year yield in the US was 4%
lower productivity,” Tom di Galoma chief executive officer at Seaport Global Holdings, wrote in a daily note.

https://www.marketwatch.com/story/treasury-yields-slide-head-to-lows-not-seen-in-about-a-week-as-covid-19-cases-rise-11637324259?rss=1&siteid=rss Treasury yields slide, to lows not seen in about a week as COVID-19 cases rise

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