Bond Report: 10-year Treasury yield sees biggest daily surge in 2 months as stocks rally

Bond Report

U.S. Treasury yields rose Monday, following equity markets higher, after Federal Reserve Chairman Jerome Powell said the central bank still had tools to fight the recession. Reports of early success from an experimental coronavirus vaccine also added to selling in haven bonds and buying of stocks.

What are Treasurys doing?

The 10-year Treasury note yield
TMUBMUSD10Y,
0.728%

climbed 10.1 basis points to a more than five-week high of 0.741%, marking its biggest daily rise since March 18. The 30-year bond yield
TMUBMUSD30Y,
1.440%

rose 13.6 basis points to a two-month high of 1.456%, also booking its biggest daily increase since March 18. The 2-year note rate
TMUBMUSD02Y,
0.173%

was up 3.4 basis point at 0.183%.

What’s driving Treasurys?

Modernaannounced positive results from a phase-one clinical trial for its experimental coronavirus vaccine, providing some resistance to assets perceived as havens like government debt.

Stock-market bulls have been hopeful for a remedy or vaccine for the deadly illness that has stricken more than 4.7 million world-wide as of Monday, according to data compiled by Johns Hopkins University.

Meanwhile, Powell said the central bank wasn’t out of ammunition in an interview with CBS news magazine “60 Minutes” on Sunday. He said there was “no limit” to what the Fed can do to lend money to financial markets, and suggested the central bank could still tweak its asset-purchasing program or make commitments on the future path of interest rates.

Powell will testify in front of the Senate Banking Committee on the Cares Act this week and is expected to use the platform to push for additional fiscal stimulus measures.

The S&P 500
SPX,
+3.15%

and Dow Jones Industrial Average
DJIA,
+3.85%

closed up more than 3% on Monday. The Stoxx Europe 600 index
SXXP,
+4.06%

gained 4.1%.

Overseas investors sold $299.3 billion of Treasurys during March’s bond-market rally, based on the latest Treasury International Capital report released Friday. Analysts said the liquidation of government bonds by overseas investors suggested banks and companies abroad were selling dollar-denominated assets to source greenbacks.

What did market participants’ say?

“Fast forward to this morning and the news about Moderna, and the positive news about its trials gives hope to more than to just investors about the possibility that a vaccine could come sooner than later, it gives hope to a world full of people,” said Kevin Giddis, head of fixed income at Raymond James.

“While there likely is a long road to getting there, the takeaway from this is that we are not only starved for some good news, we are clinging to it in order to move forward,” he said.

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