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Bond Report

Dec. 3, 2020, 4:07 p.m. EST

Treasury yields slip as fiscal stimulus prospects draw focus

By Sunny Oh

U.S. Treasury yields edged lower as investors focused on the prospects for another financial aid bill from Congress to combat the impact of the coronavirus pandemic.

The 10-year Treasury note yield (XTUP:BX:TMUBMUSD10Y) fell 2.9 basis points to 0.919%, while the 2-year note yield (XTUP:BX:TMUBMUSD02Y) edged 1.1 basis point own to 0.153%. The 30-year bond yield (XTUP:BX:TMUBMUSD30Y) slipped 3.9 basis points to 1.666%.

Investor attention was on the prospects for another fiscal package to combat the impact of the coronavirus pandemic after Senate Majority Leader Mitch McConnell, R-Ky., and House Speaker Nancy Pelosi spoke on phone on Thursday.

But investors said there was a lack of clarity whether lawmakers could end the months of deadlock that have held back hopes for new government spending to support the economic recovery until widespread vaccine distribution was achieved.

Economic data pointed to the improving employment backdrop, even as the jobless rate remains stubbornly high. U.S. weekly jobless claims slipped to 712,000 in late November from 787,000, while continuing claims fell to 5.52 million from 6.09 million.

The data will be followed on Friday by the U.S. Labor Department monthly employment report which is expected to reveal 438,000 job gains in November, following a 638,000 increase in the previous month.

In other U.S. economic data, the Institute for Supply Management said its index of services sector activity dipped to a six-month low of 55.9% from 56.6% in October.

“The recent volatility shows how sensitive markets are to stimulus coming to fruition. But I’m not sure we’ve seen anything concrete from Washington,” said Michael Lorizio, senior fixed-income trader at Manulife Investment Management.

“The biggest thing driving the market right now is the stimulus package that Congress is trying to enact. They seem to be looking at a smaller package, which kind of indicates a lot of tension between both sides. It’s not clear how much either side will give in,” said Tom di Galoma, managing director of Treasurys trading at Seaport Global Securities.

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