Bond Report: Treasury yields slide as investors skeptical of economic recovery

Bond Report

U.S. weekly jobless claims rise by 2.6 million

U.S. Treasury yields fell Thursday amid doubts that, even after COVID-19-related lockdowns are dismantled, the economic bounce may be more gradual or weaker than assumed.

What are Treasurys doing?

The 10-year Treasury note yield
TMUBMUSD10Y,
0.621%

fell 3.1 basis points to 0.617%, while the two-year note rate
TMUBMUSD02Y,
0.153%

was virtually flat at 0.0149%. The 30-year bond yield
TMUBMUSD30Y,
1.293%

slid 4.6 basis points to 1.294%, a two-week low.

What’s driving Treasurys?

Demand for havens remained robust as investors questioned what a return to economic activity would look like in the U.S., Europe and Asia. The World Health Organization said the COVID-19 disease “may become just another endemic virus in our communities, and this virus may never go away.”

Even as government bonds rallied, U.S. equities mounted late gains on Thursday. Usually, gains in stocks come at the expense of Treasurys as investors look to take shelter from market volatility.

The S&P 500 index
SPX,
+1.15%

advanced 1.2% and the Dow Jones Industrial Average
DJIA,
+1.62%

gained 1.6%. But both benchmark indexes are still on pace to end lower for the week.

In U.S. economic data, weekly jobless claims rose by 2.6 million in the week ended May 9, slightly lower than a consensus forecast of 2.7 million according to Dow Jones data. The Labor Department originally reported that new claims totaled close to 3 million.

The new claims also brought the coronavirus-crisis total to nearly 36.5 million jobs lost over the past two months, by far the biggest loss in U.S. history, sending the unemployment rate up to over 15%.

Read: This ‘new threat’ to the U.S. economy flies in the face of conventional wisdom

What did market participants say?

“Once again the shift away from risk is happening, and the reason is fairly simple: Investors are beginning to believe that COVID-19 will make it very difficult to see the recovery that was expected just a few weeks ago,” said Kevin Giddis, chief fixed-income strategist at Raymond James.

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