Bond Report: Treasury yields pare rise as stocks point lower on lack of pledged action from G-7

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U.S. Treasury yields came off their highs on Tuesday after a statement from the Group of Seven economies showed policy makers offered no specific action to offset the economic impact from the COVID-19 outbreak, weighing on the performance of stocks.

What are Treasurys doing?

The 10-year Treasury note yield TMUBMUSD10Y, -3.58% rose 4.1 basis points to 1.129%, down from an intraday high of 1.17%, while the 2-year note rate TMUBMUSD02Y, -6.12% was up 3.7 basis points to 0.863%. The 30-year bond yield TMUBMUSD30Y, -1.83% climbed 4.4 basis points to 1.689%. Bond prices move in the opposite direction of yields.

What’s driving Treasurys?

Finance ministers and central bankers from the group of the seven world’s largest advanced economies said they stood ready to act to address the coronavirus, suggesting a willingness to use fiscal and monetary policy measures. But a lack of concrete details on what such policies might look like helped to dampen the mood in stocks, a day after the Dow Jones Industrial Average booked its best one-day percentage gain since 2009.

The swoon in risk assets helped to draw investors into government paper, helping to roll back some of the overnight climb in bond yields. Futures for the S&P 500 SPX, +4.60% and Dow Jones Industrial Average DJIA, +5.09% turned lower on Tuesday, pointing to a drop at the opening bell for Wall Street.

Still, many remain hopeful of central-bank action, with the Federal Reserve expected to cut rates substantially at its March meeting.

U.S. politics may also draw attention from traders during so-called Super Tuesday, when 14 states will hold their Democratic presidential primary elections.

What did market participants’ say?

“While skeptics wonder how forcefully monetary policy will ease, the markets’ primary doubt concerns governments’ ability to do their share on the medical and regulatory front,” wrote Jim Vogel, an interest-rate strategist at FHN Financial.

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