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Treasury Yields Hold Ground as Coronavirus Jitters Cool

Treasury yields were mostly unchanged Thursday as the bond market started to find more stable footing after days of intense volatility sparked by the coronavirus outbreak.

What are Treasurys doing?

The 10-year Treasury note yield TMUBMUSD10Y, 0.608% was down 0.5 basis points to 1.644%. The two-year note rate TMUBMUSD02Y, 0.236% was up 0.6 basis points to 1.447%. The 30-year bond yield TMUBMUSD30Y, 1.197% fell 1.8 basis points to 2.114%. Yields and debt prices move in opposite directions.

What’s driving Treasurys?

China announced it would halve tariffs on $75 billion of U.S. imports, starting next week, and coming after the signing of the phase one U.S.-China trade deal in January.

That helped to bolster sentiment in risk assets, which have shrugged off global growth concerns around the coronavirus. The S&P 500 SPX, 0.33% and the Dow Jones Industrial Average DJIA, 0.10% finished at records Thursday.

European Central Bank President Christine Lagarde said the policy room to fight economic shocks from overseas had “significantly reduced, ” just as new worries like the coronavirus blight the global outlook. She also added that eurozone growth was weak but stabilizing.

Cracks appeared to show in that assessment after factory orders for Germany, the eurozone’s leading economy, fell 2.1% in December. That represents the sharpest decline in over a decade.

On the data front, weekly jobless claims fell by 15,000 to 202,000 for the seven-day period ending Jan. 31. Fourth-quarter productivity rose 1.4%, bouncing from an 0.2% increase in the previous three-month period. Unit labor costs also rose 1.4% in the last quarter of 2019, from 2.5% in the previous quarter, a sign that wage increases could be cooling even as labor markets tighten.

The January jobs report will command the attention of investors on Friday. MarketWatch-polled analysts expect the data to show that the U.S. economy added 164,000 jobs in January.

See: U.S. likely added 164,000 jobs in January  but hiring in 2019 might not look as rosy

Senior Federal Reserve officials will also talk more about monetary policy on Thursday, with Fed Vice Chairman for Banking Supervision Randal Quarles scheduled to speak.Dallas Fed President Robert Kaplan said he forecasts solid economic growth this year.

What did market participants say?

“The current level of the 10-year Treasury has to do with the coronavirus and the expectations for a dovish Fed. In general, it seems with regards to the virus, people see it as a temporary matter,” said Daniel Oh, a portfolio manager at Osterweis Capital Management, in an interview with MarketWatch.

“Short term, it’s hard to argue with the price action in the rate market. With 10-year U.S. yields at the lower end of the range coming out of last week, the energy to propel yields lower, all things considered, was simply not there,” wrote Gregory Faranello, head of U.S. rates at AmeriVet Securities.

By: Sunny Oh