Bond Report: 10-year Treasury yield below 1% amid renewed haven inflows

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U.S. Treasury yields traded lower again on Thursday as weakness in a volatile stock market helped to draw investors into government paper, amid worries how the COVID-19 outbreak would upend consumer activity and supply chains in the U.S.

What are Treasurys doing?

The 10-year Treasury note yield TMUBMUSD10Y, 0.960% fell 2.7 basis points to 0.965%, near its intraday record of 0.914% while the 2-year note rate TMUBMUSD02Y, 0.621% was down 1.6 basis points to 0.623%, a day after it hit a mid-2016 low. The 30-year bond yield TMUBMUSD30Y, 1.615% fell 1.7 basis points to 1.619%. Bond prices move in the opposite direction of yields.

What’s driving Treasurys?

Fresh worries that the coronavirus would start to weigh on the U.S. economy reined in the 10-year benchmark maturity’s bid to push above 1% yield in overnight trading. So far, the U.S. impact has yet to materialize in hard data, but analysts say it is inevitable that economic growth will take a hit in the first quarter.

Investors are also paying attention to global travel restrictions, put in place to contain the virus. United Airlines and JetBlue Airways have started to scale back their U.S. flight schedules on Wednesday as demand for travel shrinks among passengers. Conferences across the globe have also been cancelled.

COVID-19 case tally: 95,748 cases, 3,286 deaths

Futures for the S&P 500 SPX, +4.22% and the Dow Jones Industrial Average DJIA, +4.52% point to a lower open for Wall Street on Thursday, as volatility has roiled U.S. equities in the past two weeks.

On the docket, investors will contend with U.S. jobless claims, factory orders numbers and durable goods data in the morning.

Senior Federal Reserve officials will also speak later in the day, including Dallas Fed President Robert Kaplan, Minneapolis Fed President Neel Kashkari, and New York Fed President John Williams. Their comments could offer clues on whether the U.S. central bank will lower interest rates again in two weeks at its scheduled policy meeting, as traders add to bets that the Fed will carry out an additional rate cut on top of the 50 basis point surprise cut on Tuesday.

What did market participants’ say?

“Virus headlines, especially on travel concerns, appear to be the main concern for the market,” wrote Tom di Galoma, managing director of Treasurys trading at Seaport Global Securities.

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