Treasury Yields Climb After Hitting Lowest Levels Since Spring -- 4th Update
By Caitlin Ostroff and Sam Goldfarb
Long-term Treasury yields finished the day higher Friday but not
before dipping to fresh multimonth lows earlier in the session, the
latest sign of how rising coronavirus cases are driving demand for
ultrasafe government bonds.
The yield on the benchmark 10-year U.S. Treasury note traded as
low as 0.571%, its lowest intraday level since April 21, before
recovering to close at 0.633%, according to Tradeweb, compared with
0.605% on Thursday.
The yield on the 30-year Treasury bond touched its lowest
intraday level since early May, falling as low as 1.249% before
settling at 1.326%.
Ultralow long-term yields indicate investors expect short-term
interest rates to remain near zero for a prolonged period. Yields,
which move in the opposite direction of bond prices, had climbed in
early June when investors were more optimistic about the economy
emerging from coronavirus lockdowns.
Investors are monitoring rising coronavirus cases and the
likelihood of further lockdowns curtailing the recent economic
recovery. New coronavirus cases in the U.S. rose by more than
63,000 on Thursday, another single-day record, as hospitals in
Texas, California and other states strained to accommodate a surge
of new patients.
"You have increased uncertainty globally, and you have more
savings, so investors are looking to put money to work in a more
conservative way," said Andrey Kuznetsov, senior credit portfolio
manager at Federated Hermes. "As a result this drives demand" for
bonds, he said.
Bond yields have edged lower even as governments have issued
more debt to fund relief efforts to combat the economic impact of
the coronavirus. In the U.K., the yield on the five-year gilt, as
British government bonds are known, hit a record low Friday of
minus 0.092%. Investors there anticipate that the Bank of England
will implement negative policy rates in the future.
Despite continued demand for safe assets, volatility in U.S.
bond markets has fallen to levels near those seen before the
coronavirus pandemic. The MOVE Index, a measure of Treasury yield
volatility implied by options prices, fell to 50 on Friday after
surpassing 150 at the height of the March selloff.
The drop is in large part due to measures taken by the Federal
Reserve and other central banks to backstop credit and funding
markets, Mr. Kuznetsov said.
In stock markets, by contrast, a popular measure of future
volatility known as the Cboe Volatility Index, or the VIX, has
remained elevated. Stock-market investors worry that markets could
return to their dramatic swings from earlier in the year. Further
lockdowns to stem the spread of the coronavirus could rattle
fragile investor confidence, driving demand for safer assets,
analysts and investors said.
Write to Caitlin Ostroff at firstname.lastname@example.org and Sam
Goldfarb at email@example.com
(END) Dow Jones Newswires
July 10, 2020 17:04 ET (21:04 GMT)
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