By Sunny Oh
U.S. Treasury yields slid Wednesday as global stocks came under pressure amid worries about the coronavirus vaccine rollout and excessive froth in some corners of financial markets.
What are Treasurys doing?
The 10-year Treasury note yield /zigman2/quotes/211347051/realtime BX:TMUBMUSD10Y -7.21% fell 2.5 basis points to a three-week low of 1.014%, briefly touching the key 1% level. The 2-year note rate /zigman2/quotes/211347045/realtime BX:TMUBMUSD02Y -31.11% retreated 0.4 basis point to 0.119%. The 30-year bond yield /zigman2/quotes/211347052/realtime BX:TMUBMUSD30Y -6.43% declined 2.1 basis points to 1.780%.
What’s driving Treasurys?
Haven assets strengthened as U.S. equities saw steep losses at the start of Wednesday’s trading. Analysts attributed some of the weakness in risk assets to slowness of the vaccine rollout in Europe and the U.S.
Investors also fretted that signs of market froth suggested stocks were due for a correction, against the background of short squeezes in some popular stocks like GameStop /zigman2/quotes/203755179/composite GME -6.43% .
The S&P 500 /zigman2/quotes/210599714/realtime SPX -0.48% and Nasdaq /zigman2/quotes/210598365/realtime COMP +0.56% were both down over 2%, while the Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA -1.50% fell over 600 points.
The Federal Reserve kept rates and its pace of bond purchases unchanged on Wednesday, saying that the strength of the recovery had moderated due to the COVID-19 pandemic.
Fed Chairman Jerome Powell said the Fed would be patient on inflation, and that any rising prices this year would prove to be “transient.”
European Central Bank governing council member Klaas Knot said on Wednesday the ECB could still cut interest rates if it needed to offset the euro’s strength, which can counter some of the central bank’s accommodative policies.
The 10-year German government bond yield /zigman2/quotes/211347112/realtime BX:TMBMKDE-10Y -13.11% fell 1.5 basis points to negative 0.577%.
In U.S. economic data, durable goods rose by 0.2% , falling short of the 0.8% forecast from MarketWatch-polled analysts mostly because of weakness in aircraft orders.
What did market participants say?
“Part of the [Treasurys] rally we would attribute to normal volatility. But also we are getting some change in terms of expectations around fiscal stimulus. And when we think about the virus in particular, we’re seeing more restrictions put in Europe and California only starting to remove some restrictions,” said Tony Rodriguez, head of fixed income strategy at Nuveen.