March 12, 2020 / 2:24 PM / 18 days ago

U.S. Treasury yields dive as market looks for aggressive Fed action

CHICAGO - U.S. Treasury yields tumbled on Thursday as stocks took another beating and anticipation grew for aggressive easing on the part of the Federal Reserve to help deal with the economic fallout from the spreading coronavirus.

The 10-year note yield US10YT=RR was last at 0.666%, down from 0.822% at Wednesday’s close.

“We’re back to basic panic flight to quality, flight to safety again,” said Kim Rupert, senior economist at Action Economics in San Francisco.

She added that the plan President Donald Trump announced late Wednesday to protect the economy from the ravages of the coronavirus was “just not real clear at this point.”

“The markets were hoping for a lot more fiscal action and quicker,” Rupert said.

After its surprise 50 basis-point cut last week, more Fed action was expected.

“Bottomline the Fed’s cutting to zero at some point in the next two meetings,” said John Herrmann, a rates strategist at MUFG Securities in New York.

In an effort to address liquidity concerns, the New York Federal Reserve raised the overnight repurchase agreement (repo) operation limit twice this week, with the latest move lifting the limit to $175 billion through mid-April. On Thursday, it accepted all $103.10 billion in bids from primary dealers.

Thirty-year Treasury yields US30YT=RR were at 1.259%, down from 1.315% Wednesday’s close.

Two-year Treasury yields US2YT=RR were trading at 0.427%.

On the data front, there was little reaction in the market to an unexpected fall in jobless claims last week and a drop in producer prices in February.

The Treasury will sell $16 billion of 30-year bonds on Thursday.

Additional reporting by Karen Brettell in New York

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