Bond Report: Treasury yields jump sharply in volatile trading as stock log best day since 2008

Treasury yields climbed Friday, capping a sharp week long rise, as stocks surged on optimism around measures that U.S. and other policy makers across the world have pledged to cushion the expected economic pain from the COVID-19 epidemic.

What are Treasurys doing?

The 10-year Treasury note yield TMUBMUSD10Y, +23.60% was up 10.4 basis points to 0.946%, adding to a weeklong rise of 23.7 basis points, the largest such increase since last September.

The 2-year note rate TMUBMUSD02Y, +7.02% was virtually unchanged at 0.484%, and nearly flat for the week. The 30-year bond yield TMUBMUSD30Y, +7.83% surged 13.9 basis points to 1.541%, contributing to a weeklong climb of 32.5 basis points, its largest such move since last September. Bond prices move in the opposite direction of yields.

What’s driving Treasurys?

Demand for safe-haven assets fell as global stocks staged a potent rebound on Friday as investors took encouragement from the White House’s new measures to combat the coronavirus impact. The S&P 500 SPX, +9.29% and the Dow Jones Industrial Average DJIA, +9.36% ended sharply higher, marking their biggest one-day percentage gain since October 2008, but still recorded steep losses for the week.

In the U.S., Trump declared a national emergency at a news conference, and said the number of the new tests for the coronavirus should increase next week.

House Speaker Nancy Pelosi, speaking more than a hour before the president, says that she and the Trump administration are close to agreement on a coronavirus aid package to reassure anxious Americans by providing sick pay, free testing and other resources, hoping to calm unhinged financial markets amid the pandemic.

Policy makers across Asia and Europe announced new measures to aimed at blunting the economic blow of the coronavirus. The People’s Back of China announced a cut to the amount of reserves that banks need to keep on hand, increasing room for financial institutions to lend to businesses.

The German government said it would deploy all its means to help German companies and workers deal with the impact of the coronavirus. German finance minister Olaf Scholz says a fiscal stimulus package may need to be deployed later this year.

In economic data, U.S. import prices fell 0.5% in February, partly due to lower fuel costs. The University of Michigan’s consumer sentiment index for March fell to 95.9, from 101.0 in the previous month. Economists polled by MarketWatch forecast a reading of 95.0.

What did market participants’ say?

“With the resilience of the U.S. financial system and economy being tested, accommodative monetary policy and fiscal policy steps are being implemented,” said Ward McCarthy, chief financial economist for Jefferies.