February 10, 2020 / 3:40 PM / 9 days ago

TREASURIES-Yields lower as coronavirus headlines keep demand afloat

NEW YORK, Feb 10 (Reuters) - Weekend headlines about the death toll from the coronavirus surpassing that of the 2003 Severe Acute Respiratory Syndrome (SARS) epidemic kept demand for safe-haven U.S. Treasury debt robust, driving yields lower on Monday morning.

The coronavirus death toll rose to 908 on Sunday as 97 more fatalities were recorded - the largest number in a single day since the virus was detected in the city of Wuhan in December. Across mainland China, 3,062 new infections were confirmed on Sunday, bringing the total number to 40,171, according to the National Health Commission (NHC).

The full economic impact of the virus is not yet evident, but is expected to exacerbate a slowdown in the Chinese economy. The virus has forced Beijing to extend holidays in manufacturing centers and impose strict population controls in major cities.

Treasury debt, which serves as a safe-haven investment in times of geopolitical and economic volatility, has been in demand since the start of the year. The 10-year Treasury yield , which moves inversely to price, has fallen 17.8% since Dec. 31. It was last 0.7 basis points lower to 1.571%.

“It’s the continued coronavirus headlines that are driving the market. And as more negative headlines than positive headlines come out yesterday and today it’s been a continued safe-haven bid,” said Justin Lederer, Treasury analyst and trader at Cantor Fitzgerald.

Across maturities Treasury yields were lower, with the two-year note yield down 0.4 basis point to 1.395% and the 30-year bond yield down 0.8 basis point to 2.034%.

This week, the Treasury Department will auction off $38 billion in new three-year notes on Tuesday, $27 billion 10-year notes on Wednesday and $19 billion of 30-year bonds on Thursday. As virus headlines continue to dominate the news, strong demand is expected.

“Obviously the refunding supply comes into play especially Wednesday and Thursday with tens and bonds so we’ll see how that gets taken down. Bonds right now would be at an all-time record-low yield and an all-time record-low coupon. It’s a fear trade on what the potential global growth impact is, so I think supply will definitely be important,” said Lederer.

Also on investors’ radar this week is Fed Chair Jerome Powell’s testimony before the House Financial Services Committee on Tuesday and the Senate Banking Committee on Wednesday. Consumer Price Index data will be released by the Bureau of Labor Statistics on Thursday. (Reporting by Kate Duguid; Editing by Andrea Ricci)

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