Treasury Yields are being hammered as uncertainty continues to grip the capital markets amid the havoc-causing COVID-19 pandemic. The 10-year Treasury note and the 30-year Treasury bond are on a downward spiral now that it has become clear that a new round of fiscal stimulus is highly needed to stabilize the struggling U.S economy.
Bonds Sell-Off
The 10-year Treasury note slid to lows of 0.606% as the 30-year Treasury bond slid to 1.302% as the U.S States continue to report record numbers of coronavirus cases. A fifth consecutive day of record numbers of infections, continue to arouse concerns in the bond markets.
The 10-year Treasury note had initially dipped below the 0.6% level t 0.599% as the markets reacted to a spike in coronavirus cases in the U.S. The 30 year Treasury bond also slipped to around 1.29% as U.S consumer sentiment dipped early in the month amidst fear fueled by COVID-19.
Covid-19 Uncertainty
Lockdown restrictions are increasingly becoming the norm as authorities in the U.S seek to stem the spread of the deadly virus. Concerns about the long term impact of movement restrictions continue to keep investors on edge. President Trump has already warned that the coronavirus will likely get worse from current elevated levels before things improve.
Given the uncertainty triggered by the pandemic, interest rates look set to remain at record lows one of the reasons why treasury yields are edging lower. Bonds and treasury notes tend to do well in a high-interest rate environment.
The national debt is on course to continue spiraling out of control as congress moves to discuss a fresh coronavirus aid in the coming weeks. The Federal Reserve has already pumped trillions of dollars into the economy all in the effort of calming the markets and boosting liquidity levels.
Stimulus Plan Push
With the pandemic showing no signs of slowing down, the second wave of stimulus and fiscal packages is highly needed to calm a looming storm. However, immediate reports indicate the Trump administration is planning to block billions of dollars required to enhance tracing efforts.
The administration is also continued to push for reducing funding to the Centers for Diseases Control and Prevention. President Trump is on record saying that the increased cases of infections are as a result of the country’s massive testing capacity not seen in other countries despite increasing rates of COVID-19 infections and the highest death rates on record for any country in the world. The United States has now seen a minimum of 145,000 deaths reported due to COVID-19. Brazil is the next nearest with at least 82,000 deaths reported.
The U.S is not the only country to have hit a deadlock on negotiations about funding to stamp the COVID-19 pandemic. Europe was entangled in a fierce standoff over a protracted $856 billion needed to kick start the EU economy struggling in the aftermath of the COVID-19 pandemic.
Treasury yields in the U.S and Europe should remain under pressure or flat as authorities unveil stimulus measures in response to the COVID-19 pandemic. With the COVID-19 epidemic showing no signs of easing off the low interest rate environment should continue to pile pressure of bond yields.
With the economic outlook looking gloomy by the day, bonds and treasury notes should continue to edge lower as interest rates are likely to remain at record lows.
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