Bond Report: Treasury yields follow stocks higher as worries of coronavirus ease

U.S. Treasury yields rise Wednesday as hopes that a slowdown in the cases of COVID-19—the name for the novel disease originated in Wuhan, China in late 2019—sparked a global equity rally and weighed on haven demand.

What are Treasurys doing?

The 10-year Treasury note yield TMUBMUSD10Y, +1.18% climbed 3 basis points to 1.620%, while the 2-year note rate TMUBMUSD02Y, +0.85% was up 2.1 basis points to 1.438%. The 30-year bond yield TMUBMUSD30Y, +1.00% picked up 2.9 basis points to 2.081%. Bond prices move in the opposite direction of yields.

What’s driving Treasurys?

In the last 24 hours, China’s National Health Commission on Wednesday said there were 2,015 new cases of the disease caused by a new strain of coronavirus that emerged in China, declining for a second day. Still, analysts say it may be too early to say the contagion’s spread is slowing, and that the overall economic impact on the Chinese and global economy remains uncertain.

The falling number of COVID-19 cases has energized risk assets, with futures for the S&P 500 SPX, +0.57% and the Dow Jones Industrial Average DJIA, +0.74% pointing to a higher open for Wall Street. Global equity benchmarks including the Stoxx Europe 600 index SXXP, +0.63%, China’s CSI 300 000300, +0.81% and the Japanese Nikkei 225 NIK, +0.74% were positive on Wednesday.

Federal Reserve Board Chairman Jerome Powell will deliver semiannual congressional testimony for a second day before the Senate Banking Committee on Wednesday. He has recently said the central bank would closely monitor the progress of the outbreak.

In the absence of economic data, investors will focus on coming debt supply, which may have given a bearish tilt to bond-market trading in the last few sessions. The Treasury Department will sell $27 billion of 10-year notes in the afternoon.

As part of the “concession” process, broker-dealers can sometimes bid yields higher to ensure a successful auction.

What did market participants’ say?

“A slight risk-on mood prevailed in overnight trading as new cases of the coronavirus continued to slow,” wrote Peter Schaffrik, global macro analyst for RBC Capital Markets.