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Long-Bond Yields Hits All-Time Low as Virus Concerns Mount

Long-Bond Yields Hits All-Time Low as Virus Concerns Mount
(Dana Rothstein/Dreamstime)

Friday, 21 February 2020 02:37 PM

U.S. Treasury yields were down on Friday as mounting concerns about the economic impact of the coronavirus epidemic drove investors into safe-haven assets.

Adding to concerns, a survey of purchasing managers issued Friday morning showed U.S. business activity in both the manufacturing and services sectors stalled in February on coronavirus worries.

The benchmark 10-year yield was down 5.4 basis points in afternoon trade at 1.4713%. It was the first time the note yielded less than 1.5% since early September.

The 30-year bond was down 5.4 basis points at 1.9181%. The session low was 1.886%, an all-time low.

Analysts said investors were buying government debt, sending prices higher and yields lower, on worries about cases of the virus mounting beyond China, including in South Korea and Japan.

The business activity report was worrisome as an early sign of the virus affecting U.S. companies, in contrast to other recent economic data that was stronger, said Lou Brien, market strategist for DRW Trading in Chicago.

"It's the sort of thing that raises concerns of whether we are starting to see an economic effect" in the U.S., he said. U.S. stock indexes were lower as investors scrambled for safer assets such as gold and government bonds.

Traders were probably also shedding riskier assets ahead of the weekend, as in previous Friday sessions, said Jon Hill, U.S. rates strategist for BMO Capital Markets.

"Everybody is trying to figure out how bad this will be," Hill said.

Beijing reported an uptick in cases of coronavirus and South Korea reported 100 new cases that doubled its infections. In China, authorities reported 234 infections among prisoners outside Hubei province, the epicenter.

The report ended 16 straight days of declines in new mainland cases excluding that province. Although daily updates on the outbreak have kept investors on edge, hopes that central banks across the globe will take measures to counter any slowdown have cushioned global stocks and kept the benchmark S&P 500 near all-time highs.

Several U.S. central bank officials spoke on Friday including Federal Reserve Governor Lael Brainard, who said the bank will act aggressively to counter future downturns.

Additionally, Atlanta Federal Reserve Bank President Raphael Bostic said any disruption to activity from the coronavirus outbreak will be short-lived.

The two-year U.S. Treasury yield, which typically moves in step with interest rate expectations, was down 4.9 basis points at 1.3461% in afternoon trading.

© 2020 Thomson/Reuters. All rights reserved.

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The yield on the 30-year Treasury bond dropped to an all-time low as weak manufacturing data in the U.S. stoked concern about the global economic fallout of the coronavirus epidemic.
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Friday, 21 February 2020 02:37 PM
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