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Feb. 13, 2020, 3:59 p.m. EST

Treasurys see modest rally as 30-year bond fetches lowest yield on record

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By Sunny Oh

U.S. Treasury yields fell Thursday after China reported a sharp jump in the confirmed cases of COVID-19 and deaths from the viral outbreak, renewing appetite for government paper which have sold off over the last two sessions.

What are Treasurys doing?

The 10-year Treasury note yield /zigman2/quotes/211347051/realtime BX:TMUBMUSD10Y 0.00%  declined 1.3 basis points to 1.616%, while the 2-year note rate /zigman2/quotes/211347045/realtime BX:TMUBMUSD02Y 0.00% was virtually flat at 1.442%. The 30-year bond yield /zigman2/quotes/211347047/realtime BX:TMUBMUSD03Y 0.00%  fell 2 basis points to 2.071%. Bond prices move in the opposite direction of yields.

What’s driving Treasurys?

Chinese health officials tweaked how it assessed confirmed cases of the illness derived from the novel coronavirus, resulting in the number of new cases rising by 15,152, and 254 new deaths. Most of this bump comes from the province of Hubei, which encompasses the city of Wuhan, the reported source of the virus. The new figures brought total deaths from the outbreak at 1,362, while the total number of confirmed cases of COVID-19 rose to 59,804 in China alone.

COVID-19 case tally : 14 U.S. cases, jump in cases in China after new diagnosis protocol

The sudden increase raises uncertainty about how swiftly Beijing will be able to contain the pathogen’s spread. In the past few days, investors had pointed to the declining number of infections as a cause for optimism, but that assumption has been momentarily challenged by Thursday’s update.

In economic data, January consumer prices rose by a modest 0.1%, but ticked 0.2% higher once the figures were stripped out for food and energy prices. U.S. initial jobless claims for the week ending in Feb. 8 edged up 2,000 to 205,000, underlining the strength of the labor market.

The Treasury Department held its last debt auction of the week, selling $19 billion of 30-year bonds in the afternoon. The sale stopped short by 0.7 basis point of 2.061%, the lowest in the maturity’s history. A stop-through indicates when the highest yield the Treasury sold in the auction falls below the highest yield expected when the auction began - the “when issued” level.

As for the Federal Reserve, Judy Shelton faced questions from lawmakers at her confirmation hearing on Thursday before the Senate Banking Committee. Key Republican senators appeared to raise concerns over the candidacy, amid worries that Shelton’s unconventional views and skepticism of the Fed’s independence from political interference could disrupt the central bank’s workings.

Read : Democrats open campaign to defeat Trump Fed nominee Shelton

What did market participants’ say?

“The lowest yielding long-bond auction in history, at 2.061%, came and went without consequence – a relevant development which double underlines the market’s appreciation of the reality that low rates are going nowhere fast,” said Jon Hill, an interest-rates strategist for BMO Capital Markets, in a note.

/zigman2/quotes/211347051/realtime
add Add to watchlist BX:TMUBMUSD10Y
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/zigman2/quotes/211347045/realtime
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Sept. 18, 2020 4:58p
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/zigman2/quotes/211347047/realtime
add Add to watchlist BX:TMUBMUSD03Y
BX : Tullett Prebon
0.17
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Sept. 18, 2020 4:58p
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Sunny Oh is a MarketWatch fixed-income reporter based in New York.

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