Yields click higher as investors look for reopening progress

• "We know the data is bad, so when are we going to recover and what will the trajectory look like?" she said.
• The two-year US Treasury yield, which typically moves in step with interest rate expectations, was up less than a basis point at 0.1511%.

US Treasury yields were slightly higher on Friday as investors looked for signs that public health steps have readied the economy to reopen.

The benchmark 10-year yield was up 2.5 basis points to 0.6444%, putting it close to the middle of the note's range all week and pointing to investors' faith in the government bonds despite a stream of negative economic reports, said Kim Rupert, senior economist for Action Economics

"We know the data is bad, so when are we going to recover and what will the trajectory look like?" she said.

Friday's data showed that US retail sales posted record declines in April for a second straight month as stay-in-place orders to control the spread of the novel coronavirus kept stores shuttered. The economy is on track for its biggest contraction in the second quarter since the Great Depression.

Other data on Friday showed that industrial production collapsed last month at the deepest pace in 101 years. The reports, combined with a historic 20.5 million job losses in April, buttressed Federal Reserve Chair Jerome Powell's warning on Wednesday of an "extended period" of weak growth and stagnant incomes.

Traders seemed to look past such poor numbers, which do not fit into conventional bond valuation models, said Guy LeBas, chief fixed income strategist at Janney Montgomery Scott.

"There's no forecasting framework for an economic shut-in of this magnitude," he said.

While auctions of 10-year notes and 30-year bonds adding supply this week might typically drive up yields, he said, a Treasury auction of a new 20-year bond on May 20 may have a greater impact.

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 49 basis points, 2 basis points steeper than on Thursday's close.

The two-year US Treasury yield, which typically moves in step with interest rate expectations, was up less than a basis point at 0.1511%.