NEW YORK, March 24 (Reuters) - U.S. government bond yields rose on Tuesday as investors waited for Congress to vote on a $2 trillion stimulus bill to combat the blow dealt to the U.S. economy by the coronavirus pandemic.
The U.S. Senate could pass a $2 trillion coronavirus economic stimulus package as soon as Tuesday, negotiators said, insisting they had made significant progress despite failing so far to reach a bipartisan deal on the sweeping legislation aimed at providing financial aid to Americans out of work and help to distressed industries.
The move higher in Treasury yields on Tuesday comes after they fell on Monday, with the two-year yield dipping to a seven-year low, as investors continued to buy lower-risk assets like government bonds even after the Federal Reserve announced unprecedented stimulus measures.
The benchmark 10-year yield was up 10 basis points in mid-morning trade to 0.867%, with the two-year yield up 8.1 basis points to 0.376%. The 30-year long bond yield was last up 9.4 basis points to 1.440%. Meanwhile, U.S. stocks bounced back from three-year lows at the open.
“It has been a very muted reaction so far compared with the percentage increase in stocks,” said Jim Vogel, interest rate strategist at FHN Financial.
The Treasury market is “most likely waiting to see if we get some actual votes on procedure at 2 p.m. ET that convince people that what the leaders have worked out, the rest of Congress is prepared to vote for.”
The Fed on Monday rolled out an extraordinary array of programs including backing purchases of corporate bonds for the first time, backstopping direct loans to companies and “soon” will roll out a program to get credit to small and medium-sized businesses. It also said it will expand its asset purchases by as much as needed to stabilize financial markets.
But markets were little moved by the Fed’s announcement on Monday.
“The Fed’s programs are all designed to work over time and made an excellent first splash yesterday, which is exactly what you want. But no one counts on a one-week or two-week buy program,” said Vogel.
Reporting by Kate Duguid Editing by Chris Reese