By Sunny Oh
U.S. Treasury prices edged up on Wednesday, sending yields lower as worries over the virulence of the COVID-19 pandemic helped to spark another global stock-market selloff to start the second quarter of the year, pushing investors into haven assets.
What are Treasurys doing?
The 10-year Treasury note yield (XTUP:BX:TMUBMUSD10Y) fell 6.1 basis points to a three-week low of 0.630%, while the two-year note rate (XTUP:BX:TMUBMUSD02Y) was up a basis point to 0.232%. The 30-year bond yield (XTUP:BX:TMUBMUSD30Y) tumbled 6.1 basis points to 1.285%.
For the first quarter, the 10-year note lost 1.218 percentage points, representing its steepest yield slide since September 2011, while the 30-year bond gave up 1.032 percentage points in the first three months of 2020 to also mark its sharpest skid since 2011.
What’s driving Treasurys?
President Donald Trump in a speech said the U.S. was headed toward a “painful” two weeks, as top health officials said the country could record between 100,000 and 240,000 deaths from the coronavirus even if Americans follow federal guidelines on social distancing.
Trump’s sobering comments in response to the ever-rising tally of coronavirus cases depressed the tone in equity markets across the world, spurring inflows into haven assets.
More and more investors are now contending with the possibility that the extensive lockdowns instituted across the country may stay in place for longer than expected, and that the U.S. economy may not immediately return to usual business after the virus passes.
Europe’s STOXX 600 index (STOXX:XX:SXXP) was down 2.9%, and Japan’s Nikkei index (NIKKEI:JP:NIK) tumbled 4.5%. The S&P 500 (S&P:SPX) and Dow Jones Industrial (DOW:DJIA) closed lower by more than 4% on Wednesday.
The Federal Reserve’s open-ended bond purchases also helped to anchor yields for government paper as market participants said the central bank’s actions was restoring liquidity in Treasurys trading.
In economic data, Automatic Data Processing Inc. said 27,000 private-sector jobs were lost in March, ahead of an initial weekly jobless claims number on Thursday that is likely to show millions of Americans filing for unemployment benefits last week.
Meanwhile, the Institute for Supply Management’s March purchasing managers survey for the manufacturing sector fell to 49.1%, down from 50.1% in the previous month.
In Europe, the IHS Markit eurozone manufacturing purchasing managers index fell in March to a 92-month low of 44.5 from 49.2 in February. Any reading below 50 represents a contraction in economic activity.
What did market participants say?
“On the economic side, states are locking down one by one. The reality is that the timetable for re-opening the economy is going to be longer than we thought,” said Gregory Faranello, head of U.S. rates at AmeriVet Securities, in an interview.