Treasury Bond Yields Stay Near Recent Lows
June 29 2020 - 7:14PM
Dow Jones News
By Julia-Ambra Verlaine
U.S. government yields clung near recent lows even as stock
markets rebounded Monday.
The yield on the benchmark 10-year U.S. Treasury note closed at
0.636%, according to Tradeweb. That is unchanged from Friday, when
yields posted the largest three-week decline since the week ended
April 3. The two-year yield ended the day at 0.158%, down from
0.160% Friday.
Yields have declined in recent sessions, with investors focused
on how mounting coronavirus cases will hit efforts to restart the
economy. Recent data shows an uptick world-wide, with cases passing
10 million over the weekend, and the unemployment outlook remains
uncertain.
"Markets tend to focus on one issue at a time," said Jean
Boivin, head of the BlackRock Investment Institute, the think-tank
arm of the world's biggest asset manager.
Deutsche Bank analyst Torsten Slok estimates the U.S. would need
to create 30 million jobs to get the employment-to-population ratio
back to where it was at its peak in 2000. Employment is down by
nearly 20 million jobs, or 13%, since February, the month before
the pandemic prompted states to shut down huge segments of their
economies.
Traders are looking at alternative data to form a clearer
picture on reopenings and rising new cases in states including
Texas, Arizona and Florida. According to JPMorgan analysts, Chase
card data indicated that the level of restaurant spending three
weeks ago was the strongest predictor of the rise in new virus
cases over the subsequent three weeks.
"The resurgence of infections highlights that the reopening of
the economy cannot be delivered overnight," said JPMorgan's Matthew
Jozoff, in a note to clients. "COVID-19 is as persistent as
Americans are impatient."
Still, even if the economic picture brightens and a solid
recovery begins, bond investors are skeptical about whether
short-term yields have room to move higher. That is because of
unprecedented monetary and fiscal policy deployed to get money
directly into the hands of American businesses and consumers.
Mr. Boivin, in BlackRock's midyear outlook, released Monday,
said that while the "policy revolution" was essential it has
reduced the ballast of nominal government bonds.
"Rates are near their effective lower bounds, and we see
inflation risks in coming years," said Mr. Boivin.
Write to Julia-Ambra Verlaine at Julia.Verlaine@wsj.com
(END) Dow Jones Newswires
June 29, 2020 18:59 ET (22:59 GMT)
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