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Oct. 21, 2020, 3:51 p.m. EDT

10-year Treasury yield holds at mid-June high as stimulus talks draw focus

By Sunny Oh

U.S. Treasury yields rose Wednesday, but were off session highs, as investors held out hope for a fiscal stimulus deal after U.S. House Speaker Nancy Pelosi said Democrats and the Trump administration had made progress in recent talks.

The 10-year Treasury note yield (XTUP:BX:TMUBMUSD10Y) rose 1.9 basis points to a June high of 0.815%, after trading overnight as high as 0.836% , while the 30-year bond yield (XTUP:BX:TMUBMUSD30Y) added 2.4 basis points to 1.627%, also a June high. The 2-year note rate (XTUP:BX:TMUBMUSD02Y) edged 0.2 basis point up to 0.147%.

Pelosi indicated the latest talks with the Trump administration on Tuesday had inched forward, saying that both sides had found “common ground as we move closer to an agreement.” Pelosi spoke again with Mnuchin on Wednesday.

But news reports say Senate Majority Leader Mitch McConnell, R-Ky., told the White House not to push for an agreement that would not pass muster with Republican senators, who would prefer a more smaller package than Democrats and the Trump administration have touted.

This comes after McConnell promised to vote on any bill agreed by Democrats and the White House.

Federal Reserve Gov. Lael Brainard said if lawmakers did not come up with a stimulus package soon, it could harm the economy’s progress.

Underlining the precarious backdrop, the Fed’s Beige Book publication, a collection of anecdotes from businesses across the country, showed the recovery in economic activity was tepid.

Investors digested an auction for $22 billion of 20-year U.S. Treasury notes in the afternoon. The earlier selloff in the morning cheapened bond prices, helping to lure buyers.

“U.S. fiscal stimulus talks have been a market driver for some time now and the latest developments – House Speaker Pelosi expressing some optimism on a deal being agreed by the end of this week – has given a small boost” to stocks and yields, said Mark Chandler, a rates strategist at RBC Capital Markets.

Link to MarketWatch's Slice.