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May 28, 2020, 4:45 p.m. EDT

Treasury yields edge higher as U.S. economic data less severe than expected

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By Sunny Oh

Treasury yields edged up on Thursday as analysts suggested a raft of U.S. data was not as bad as anticipated, offering modest relief to investors looking for signs that the economy was on the mend.

What are Treasurys doing?

The 10-year Treasury note yield /zigman2/quotes/211347051/realtime BX:TMUBMUSD10Y +0.12%   rose 2.6 basis points to 0.703%, while the 2-year note rate /zigman2/quotes/211347045/realtime BX:TMUBMUSD02Y +0.06%   was down 0.6 basis point to 0.176%. The 30-year bond yield /zigman2/quotes/211347052/realtime BX:TMUBMUSD30Y +0.41%  climbed 4.1 basis points to 1.471%.

What’s driving Treasurys?

Long-dated bond yields rose as U.S. economic data proved less severe than expected even as they pointed to the pain among businesses and households looking to recover from the current downturn. Initial weekly jobless claims stood at 2.12 million, in line with expectations.

One positive sign for the labor market was that the number of Americans continuing to file for jobless claims fell to 21.1 million, from 24.9 million, a sign that employees could be returning to work.

In other data, the U.S. economy contracted by 5% in the first-quarter in the second estimate, while durable goods plunged 17.2% in April, better than the consensus forecast for an 18.2% drop. Last month’s pending home sales fell 21.8%.

Tensions between Washington and Beijing drew attention as a source of continued geopolitical risk though. President Donald Trump said he would hold a press conference on China on Friday.

Chinese lawmakers passed a National Security Law for Hong Kong that has created a new flashpoint as U.S. and China spar over Beijing’s handling of the coronavirus outbreak. Congress also approved a bill that would impose sanctions on Chinese officials involved in the mass surveillance and detention of Uighurs and other ethnic groups in the western Xinjiang region.

New York Federal Reserve Bank President John Williams said the central bank had more powerful tools than negative interest rates.

Read : Here’s a $4 trillion reason why the U.S. is unlikely to have negative interest rates

The day before, Williams suggested the central bank was looking into the possibility of aiming to keep yields for different bond maturities at fixed levels, much like in Japan, but St. Louis Fed President James Bullard argued with yields so low already, such policies may not be meaningful.

What did market participants’ say?

“There was some good news in the continuing claims number, which tracks ongoing claims with a one week delay,” said Kevin Giddis, chief fixed-income strategist at Raymond James, in a note.

“While it may be a stretch to call this ‘good news,’ it is certainly ‘less bad,’ and the markets are reacting in a positive way,” he said.

/zigman2/quotes/211347051/realtime
add Add to watchlist BX:TMUBMUSD10Y
BX : Tullett Prebon
0.65
+0.0008 +0.12%
Volume: 0.00
July 8, 2020 5:00a
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/zigman2/quotes/211347045/realtime
add Add to watchlist BX:TMUBMUSD02Y
BX : Tullett Prebon
0.16
+0.0001 +0.06%
Volume: 0.00
July 8, 2020 4:59a
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/zigman2/quotes/211347052/realtime
add Add to watchlist BX:TMUBMUSD30Y
BX : Tullett Prebon
1.38
+0.0056 +0.41%
Volume: 0.00
July 8, 2020 5:00a
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Sunny Oh is a MarketWatch fixed-income reporter based in New York.

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