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Markets

Yields lower as investors await Washington relief deal

  • The benchmark 10-year yield was down 2.7 basis points at 0.5823% in afternoon trading, after reaching as high as 0.637% in the session.
  • Yields declined as traders shifted back into safe-haven securities and away from riskier bets on stocks.
28 Jul, 2020

US Treasury yields fell on Tuesday as investors waited for Washington lawmakers to reach a deal on coronavirus relief and took stock of mixed corporate earnings.

The benchmark 10-year yield was down 2.7 basis points at 0.5823% in afternoon trading, after reaching as high as 0.637% in the session.

Yields declined as traders shifted back into safe-haven securities and away from riskier bets on stocks, and a gold rally also fizzled, said FHN Financial interest rate strategist Jim Vogel.

"There's been a big decline in momentum in speculative ideas like gold and some earnings disappointments," he said. Yields also ticked down after the US Federal Reserve said it would extend several lending facilities.

US Senate Republicans announced on Monday a $1 trillion coronavirus aid package hammered out with the White House, but the proposal sparked immediate opposition.

A lack of progress will keep lowering bond yields, said DRW Trading strategist Lou Brien, as an approaching end of unemployment benefits threatens to set back the economy.

"The longer they go without coming to an agreement, the better the underlying bid will be" for Treasuries, Brien said.

US stocks fell, with the blue-chip Dow Jones industrial average weighed down by 3M Co and McDonald's Corp shares after the companies posted quarterly profits that missed estimates.

The US Treasury Department sold $44 billion of 7-year notes at auction at a high yield of 0.446%.

A closely watched part of the US Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes, seen as an indicator of economic expectations, was at 44 basis points, about 3 basis points below Monday's close.

The two-year US Treasury yield, which typically moves in step with interest rate expectations, was down 1.3 basis points at 0.1426%.

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