U.S. Treasury yields were higher Wednesday as stocks rose on a wave of stronger-than-expected corporate earnings reports and a new economic stimulus package passed by the U.S. Senate, easing demand for haven assets like government paper.
What are Treasurys doing?
The 10-year Treasury note yield
TMUBMUSD10Y,
rose 2.1 basis points to 0.592%, while the 2-year note rate
TMUBMUSD02Y,
was unchanged at 0.207%. The 30-yearbond yield
TMUBMUSD30Y,
picked up 2.1 basis points to trade at 1.183%. Bond prices move in the opposite direction of yields.
What’s driving Treasurys?
U.S. equities are poised to stage a modest comeback after a round of better-than-expected earnings reports. Congress is also rolling out a new fiscal stimulus package of $500 billion to replenish funds for a loan program aimed at small businesses. The Senate passed the bill on Tuesday, sending it over to the House of Representatives.
The boost in investor optimism is helping to roll back some of the bond-market rally this week, sparked by a record-breaking slide in crude oil prices that saw a dip into negative territory.
Anemic commodity prices have underlined the difficult backdrop for the global economy, as consumers cut back spending, factories curtail production, and shops stay shuttered.
Fiscal and monetary support, however, has given hope to investors who anticipate the worst of future economic scenarios may have been avoided.
What did market participants’ say?
“The short term story in the market remains oil. Yet, this is much bigger than oil. Equities stabilize and move higher overnight as oil continues to fall. The price action over the last 48 hours not only points us back to the economy and demand side, but is showing signs of spillover and contagion in risk toward other markets,” said Gregory Faranello, head of U.S. rates at AmeriVet Securities, in a note.
“You have unprecedented monetary involvement. That’s certainly one of the most powerful forces helping people look through that short-term malaise,” said Christian Hoffmann, portfolio manager at Thornburg Investment Management, in an interview.