Treasury Yields Hold Ground as Reopening Stays in Focus

“How things evolve in the second half [of the year] will largely depend on the virus in our opinion. If the virus remains under control and we don’t move back to a situation that we had in April and May, all signs point to a continued recovery in the economy,” said Gregory Faranello, head of U.S. rates at AmeriVet Securities.

Treasury prices struggled for direction on Wednesday as investors closely watched how individual U.S. states were going about reopening businesses and easing social restrictions with coronavirus cases rising in some areas of the country, just as the economy is starting to recover.

What are Treasurys doing?

The 10-year Treasury note yield TMUBMUSD10Y, 0.743% was virtually unchanged at 0.756%, while the 2-year note rate TMUBMUSD02Y, 0.201%edged 0.2 basis points down to 0.201%. The 30-year bond yield TMUBMUSD30Y, 1.541% rose 1.2 basis points to 1.550%.

What’s driving Treasurys?

Investors remain focused on U.S. efforts to reopen the economy amid signs that several states, such as Texas, Arizona and Florida, are seeing a record increase in new COVID-19 infections and hospitalizations. The U.S. now has more than 2.1 million confirmed cases and close to 117,000 deaths, according to Johns Hopkins University data.

Meanwhile Beijing is moving quickly to combat a second wave outbreak of the epidemic and geopolitical jitters came from Asia, as tensions between South Korea and North Korea flared up, and Indian and Chinese troops sparred between their country’s borders.

Federal Reserve Chairman Jerome Powell will testify in front of Congress again Wednesday, after cautioning Tuesday that the central bank had no intention of running through the bond-market “like an elephant,” disappointing some who saw the Fed’s decision to start buying individual corporate bonds on Tuesday as part of steps toward speeding up its purchases of corporate debt.

Investors will digest some U.S. economic data. May housing starts and building permits, due at 8:30 a.m. ET, could give clues to how swiftly the homebuilding industry is recovering from the coronavirus shock.

An auction for $17 billion of 20-year notes TMUBMUSD20Y, 1.310% in the afternoon could also influence trading. The 20-year note yield was up a single basis point to 1.321%.

What did market participants’ say?

“How things evolve in the second half [of the year] will largely depend on the virus in our opinion. If the virus remains under control and we don’t move back to a situation that we had in April and May, all signs point to a continued recovery in the economy,” said Gregory Faranello, head of U.S. rates at AmeriVet Securities.