Bond Report: Treasury yields climb to take cue from U.S. stock-market rebound

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Treasury yields rose on Monday, following stock-index futures higher as U.S. equities looked to rebound from a selloff last week triggered by worries around China’s coronavirus outbreak.

What are Treasurys doing?

The 10-year Treasury note yield TMUBMUSD10Y, +2.72%   rose 2.4 basis points to 1.543%, while the 2-year note rate TMUBMUSD02Y, +2.71%   was up 1.8 basis points to 1.347%. The 30-year bond yield TMUBMUSD30Y, +1.57%   rose 1.8 basis points to 2.030%.

What’s driving Treasurys?

U.S. equities looked to recover on Monday trading, even as stocks listed in mainland China took a drubbing after their markets reopened with the end of the Lunar New Year holidays. The CSI 300 index 000300, -7.88%, composed of the biggest stocks listed in Shanghai and Shenzhen, slumped 7.9% to kick off the week.

See: Markets in mainland China plunge after layoff, but not as much as feared

China’s central bank said it would inject 1.2 trillion yuan ($173 billion) into local money markets, to soften the shock from the coronavirus.

Economists expect the second largest economy in the world to slow in the first-quarter as workers delay their return to factories and shoppers curtail their buying habits, amid efforts to discourage face-to-face contact. This could dent hopes for a global economic recovery in 2020.

In economic data, the Institute for Supply Management will release its January U.S. manufacturing index at 10 a.m. ET. Analysts are expecting industrial activity to increase this month to a reading of 48.5%, from 47.2% in December.

Politics will draw attention this week, with the Iowa caucus set for Monday, puttingthe Democratic primary contestin focus. The renewed strength of Sen. Bernie Sanders’s campaign has troubled some in Wall Street who worry his pro-regulatory stance could hurt industries such as health care and energy.

This week will also see a slew of speeches from senior Federal Reserve officials. Atlanta Fed President Raphael Bostic will speak later at 4 p.m. ET. Fed Chairman Jerome Powell said last week that the U.S. central bank was monitoring the spread and economic impact of the pathogen’s dissemination.

What did market participants’ say?

“The spread of the coronavirus continues to dominate the headlines with fresh cases also reported in the U.S. and Europe. [Treasury] yields were, nevertheless, even slightly up compared with Friday,” wrote Peter Schaffrik, global macro analyst for RBC Capital Markets.

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