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Jan. 24, 2020, 3:45 p.m. EST

Treasury yields sink to October low after new coronavirus case in U.S.

Eurozone manufacturing PMI turns higher in January

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By Sunny Oh

Treasury yields slumped on Friday after another case of the coronavirus was reported in the U.S., raising worries that the pathogen from China may have a bigger impact on travel and trade than initially thought.

What’s driving Treasurys?

The 10-year Treasury note yield /zigman2/quotes/211347051/realtime BX:TMUBMUSD10Y +3.98%  slipped 5.9 basis points to 1.680%, its lowest since Oct. 10, contributing a 15 basis point decline this week. The 2-year note rate /zigman2/quotes/211347045/realtime BX:TMUBMUSD02Y -12.86%  fell 3.4 basis points to a more than three-month low of 1.484%, adding to a 8.5 basis point decline this week. Both maturities marked their biggest weeklong drops in close to four months.

The 30-year bond yield /zigman2/quotes/211347052/realtime BX:TMUBMUSD30Y +2.10%   was down 5.3 basis points to 2.128%, its lowest since Oct. 9, extending a 16.7 basis point decline for the week.

What are Treasurys doing?

Investors continued to monitor the coronavirus’s rapid progress in China and across the globe, amid fears that it could dent the global economy’s momentum. The Centers for Disease Control and Prevention said that it found its second case of the coronoavirus in the U.S.

Analysts cautioned that if the virus is not contained in the next few months, it could chip a few points off China’s economic growth rates at a time when its overall share of the world economy was second only to the U.S.

In European economic data, the composite measure of the eurozone purchasing manager indices for January came in at 50.9, virtually unchanged from the previous month’s reading. But analysts noted that the manufacturing PMI had increased to 47.5 from 46.1, an indication that confidence among factory-owners was improving in the wake of the phase one trade-deal signing. Any number above 50 represents an expansion in economic activity, and below 50 is considered a contraction.

The U.S.’s own purchasing manager surveys underlined the divergence between an anemic manufacturing sector and a resilient services industry. The IHS Markit flash manufacturing PMI fell to 51.7 in January from 52.4 in the prior month, while the services PMI rose to 53.2 from 52.8 in December.

What did market participants’ say?

“From what we can determine the uncertainty surrounding the coronavirus and its effect on the Chinese economy is where this bid in the Treasury market is coming from,” said Tom di Galoma, managing director of Treasurys trading at Seaport Global Securities.

add Add to watchlist BX:TMUBMUSD10Y
BX : Tullett Prebon
+0.03 +3.98%
Volume: 0.00
Oct. 1, 2020 9:49a
add Add to watchlist BX:TMUBMUSD02Y
BX : Tullett Prebon
-0.02 -12.86%
Volume: 0.00
Oct. 1, 2020 9:49a
add Add to watchlist BX:TMUBMUSD30Y
BX : Tullett Prebon
+0.03 +2.10%
Volume: 0.00
Oct. 1, 2020 9:49a

Sunny Oh is a MarketWatch fixed-income reporter based in New York.

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