U.S. Treasury yields fell on Monday as investors anticipated further details on how the Federal Reserve’s stimulus measures might take shape, and eyed the extension of containment policies aimed at combating the COVID-19 outbreak.
What are Treasurys doing?
The 10-year Treasury note yield
TMUBMUSD10Y, -4.51%
tumbled 9.5 basis points to 0.649%. The 2-year note rate
TMUBMUSD02Y, +6.26%
was virtually unchanged at 0.259%, while the 30-year bond yield
TMUBMUSD30Y, -2.40%
slumped 8.2 basis points to 1.253%. Bond prices move in the opposite direction of yields.
What’s driving Treasurys?
President Donald Trump said virus guidelines on social distancing would be extended to the end of April, a reversal from his hopes that the guidelines could be relaxed by Easter on April 12. The lockdown of large segments of the U.S. economy is likely to keep industrial activity at a standstill.
Futures for the S&P 500
SPX, -3.37%
and the Dow Jones Industrial Average
DJIA, -4.06%
were trading higher early Monday.
Investors are awaiting measures by the Fed to provide lending to small businesses after President Donald Trump signed a $2 trillion fiscal package buttressing the U.S. economy. The bill is directing $454 billion of funds to the U.S. central bank, with the expectation that the central bank will leverage up the capital to lend to businesses, states and municipalities.
See: Stock-index futures mixed as investors keep focus on coronavirus numbers
In economic data, pending home sales for February are due at 10 a.m. ET, but is unlikely to provide a view on how the housing industry will hold up after the coronavirus outbreak.
In other news, the U.K. was downgraded a single notch by Fitch to AA in part due to the coronavirus impact on government revenues. The British bond-market, or gilts, appeared to shrug off that announcement, with the 10-year U.K. government bond yield
TMBMKGB-10Y, -13.08%
down 4.4 basis points to 0.314%, Tradeweb data show.
What did market participants’ say?
“A growing number of those infected and death tolls have risen has pushed markets into another “risk-off” session. As the month-end closes, we should see more fixed-income rebalancing into equity markets especially in the U.S.,” wrote Tom di Galoma, managing director of Treasurys trading at Seaport Global Securities.
Into the end of the month, investors will frequently increase their holdings of government bonds to ensure the maturity of their overall portfolio lines up with their competing index. But di Galoma says once that bullish impulse gives way, many balanced mutual funds and pension funds will start need to selling their inflated bonds and reallocate into equities.
Source : MTV