U.S. Government-Bond Yields Rise
June 03 2020 - 12:39PM
Dow Jones News
By Sebastian Pellejero
U.S. Treasury yields climbed to near the top of their recent
range Wednesday after better-than-expected data on job losses and
the services sector boosted investors' optimism about an economic
rebound.
The yield on the benchmark 10-year U.S. Treasury note rose to
around 0.769% during intraday trading, according to Tradeweb, up
from 0.679% at Tuesday's close. The 30-year yield rose to 1.566%,
from 1.478% Tuesday. Yields rise when bond prices fall.
The climb came after a report by the ADP Research Institute
showed private sector employment in the U.S. decreased by 2.76
million jobs from April to May, beating analysts' expectations. The
rise continued after the Institute for Supply Management said its
nonmanufacturing index, which tracks a range of U.S. sectors such
as health care, finance and agriculture, also came in better than
expected.
Wednesday's data boosted investors' hopes that the U.S. economy
is improving as coronavirus infections fall and restrictions on
public gatherings ease. Meanwhile investors are anticipating added
stimulus measures, with President Trump planning to meet with
senior advisers as soon as this week to discuss options for the
next coronavirus relief package as the administration prepares for
negotiations with Congress.
Some investors said the government's plans to sell more
longer-term bonds in coming weeks was also pushing yields higher.
In one sign that the increased supply of debt was hitting bonds
with longer maturities, the gap between the five-year and 30-year
Treasury yield increased to 1.188 percentage points early
Wednesday, the widest since February 2017.
The difference between the two has widened even as the gap
between three-month and 10-year yields has remained steady. Federal
Reserve policy and Treasury supply are driving the move.
"There's a ton of long-term bond supply pending," said Gennadiy
Goldberg, senior U.S. rates strategist at TD Securities. "There's
almost no upcoming weeks where you don't get long-end bond supply
in the U.S."
On Thursday, the Treasury will announce the supply of 3-year,
10-year and 30-year government bonds to be auctioned next week,
which Mr. Goldberg says may cause the dispersion between yields on
shorter-term bonds and those on longer-term debt -- known as the
yield curve -- to steepen further.
Some analysts have suggested that the recent yield curve
steepening is being driven in part due to the Fed pulling back from
its Treasury purchases. In March, the central bank was buying $75
billion of Treasurys a day. This week, the Fed is buying a total of
just $22.5 billion in bonds.
Write to Sebastian Pellejero at sebastian.pellejero@wsj.com
(END) Dow Jones Newswires
June 03, 2020 12:24 ET (16:24 GMT)
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