10-year note yield near 2-week low as U.S. sets record for new coronavirus infections

“As the Fed pointed out recently, and it’s true, the health side of the equation will matter just as much as monetary policy in the coming months. And with markets priced for near perfection off the March 23rd bottom, we are quickly reminded of the challenges that still persist,” said Gregory Faranello, head of U.S. rates at AmeriVet Securities.

Treasury yields fell Thursday, with the 10-year rate near its lowest in about two weeks, as reports of soaring coronavirus cases in a number of states have shaken investor optimism and momentarily deflated run-up in assets to the benefit of government debt.

What are Treasurys doing?

The 10-year Treasury note rate TMUBMUSD10Y, 0.671% dropped 2 basis points to 0.664%, while the 2-year note yield TMUBMUSD02Y, 0.179% edged 0.6 basis point down to 0.182%. The 30-year bond yield TMUBMUSD30Y, 1.418% slipped 3.5 basis points to 1.411%. 

What’s driving Treasurys?

The focus remains on the growing tally of coronavirus infections in more states. That has pushed the U.S. to a record in daily new cases. On Wednesday, the U.S. reported 38,680 new cases, edging out the previous high of 36,739 cases on April 24, the Associated Press reported. 

Meanwhile, states that have made progress in controlling the coronavirus, but were also the worst-hit in the early days of the pandemic, are moving to curtail the risk from rising infections in other parts of the country. New York, New Jersey and Connecticut imposed a two week quarantine on visitors coming from states and areas with high infection rates. 

Renewed concerns around the pandemic could stall efforts to reopen businesses and ease restrictions on social activities, slowing the pace of the economic rebound.

Investors will face a raft of important U.S. economic data in the morning. May durable goods and last month trade deficit data will come out at 8:30 a.m. Eastern Time, along with the latest jobless claims numbers. MarketWatch-polled economists expect Americans to file 1.38 million new applications for unemployment benefits, down from 1.51 million. 

The Federal Reserve will also release the results of the stress tests of U.S. banks, which are designed to check if the banks can survive a severe economic downturn without curbing lending. 

What did market participants’ say?

“As the Fed pointed out recently, and it’s true, the health side of the equation will matter just as much as monetary policy in the coming months. And with markets priced for near perfection off the March 23rd bottom, we are quickly reminded of the challenges that still persist,” said Gregory Faranello, head of U.S. rates at AmeriVet Securities.