U.S. Treasury yields retreat as COVID-19 pandemic intensifies

U.S. Treasury yields fell and prices rose early Monday as safe-haven assets rallied in response to the new lockdown measures imposed by California amid the worsening COVID-19 pandemic.

What are Treasurys doing?

The 10-year Treasury note yield
TMUBMUSD10Y,
0.944%

fell 2.5 basis points to 0.944%, while the 2-year note rate
TMUBMUSD02Y,
0.152%

edged 0.6 basis point down to 0.147%. The 30-year bond yield
TMUBMUSD30Y,
1.702%

slipped 3.2 basis points to 1.699%.

What’s driving Treasurys?

Market participants gave into the cloud of pessimism around the current COVID-19 pandemic, as California announced stay-at-home restrictions for the U.S.’s most populous state starting from Sunday night.

The U.S. counted 173,459 new cases on Sunday, and at least 1,111 people died, according to a New York Times tracker. There was also a record of 101,487 COVID-19 patients in U.S. hospitals on Sunday, according to the COVID Tracking Project, topping Saturday’s record.

In recent weeks, the bond market had overlooked the near-term gloom around the pandemic and eyed the round of positive vaccine developments that showed there was light at the end of the tunnel.

Halting progress toward a fiscal coronavirus relief package in Washington will also be in focus throughout the week.

What did market participants say?

“The market will find it hard to continue to look through the ongoing rising near term fallout from second, and very possibly third, waves of the virus, that it will be difficult to ignore permanent scarring from the contagion,“ said analysts at Rabobank, who also noted there could be difficulties in mass vaccine distribution.

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