By Sunny Oh
Treasury yields fell slightly on Thursday after mixed economic data was reported by both the U.S. and China suggesting that the global economy may recover only slowly from the coronavirus pandemic.
What are Treasurys doing?
The 10-year Treasury note yield /zigman2/quotes/211347051/realtime BX:TMUBMUSD10Y -1.11% fell 1.8 basis points to 0.611%, its lowest level in a week, while the 2-year note rate /zigman2/quotes/211347045/realtime BX:TMUBMUSD02Y +0.07% was down 0.6 basis point to 0.147%, the lowest since May 8. The 30-year bond yield /zigman2/quotes/211347052/realtime BX:TMUBMUSD30Y -1.11% slipped 2.8 basis points to 1.302%.
What’s driving Treasurys?
In U.S. economic data, initial weekly jobless claims came in at 1.3 million. It was the 16th straight week in which initial claims totaled at least 1 million, highlighting a painfully slow recovery for the labor market. Continuing claims, or the total number of Americans claiming ongoing unemployment benefits in state programs, fell slightly to 17.3 million in the week ended July 4.
In other data, June retail sales jumped by 7.5% and the Philadelphia Federal Reserve’s manufacturing index for July rose to a reading of 21.
At the same time, investors worried that without an extension of the extra jobless benefits under the CARES Act, which are set to expire at the end of July, the U.S. economic recovery may be even slower.
China’s economic growth rebounded by 3.2% in the second-quarter led by infrastructure investment, but investors noted retail sales had fallen by 3.9% over the same stretch, underlining how governments struggled to stimulate consumption.
Goldman Sachs analysts also noted the strong China growth numbers could reduce pressure on Beijing to carry out further fiscal or monetary stimulus measures.
The disappointing Chinese and U.S. data led to bearish trading in global equity markets, boosting inflows into haven assets.
The European Central Bank, as expected, made no changes Thursday to interest rates or its asset-buying program, after having expanded the size of its pandemic emergency purchase program, or PEPP, in June.
As for the Fed, Chicago Fed President Charles Evans said the central bank needed to convince the public that the Fed would do everything it takes to revive the economy.
What did market participants’ say?
”The question going forward will be: Can business recover without the Fed’s money and how can we do this while the COVID-19 numbers continue to rise? My guess is that we won’t. We will likely need more stimulus from the Fed as well as an additional fiscal response from Congress,” said Kevin Giddis, chief fixed-income strategist at Raymond James.