Bond Report: U.S. government bond yields tick higher as investors monitor coronavirus spread

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U.S. Treasury yields rose Monday in choppy trading as investors juggled with the uncertainty of how a recovery might take shape in the face of a COVID-19 pandemic.

Markets in Europe and some other parts of the world were closed in observance of Easter Monday. In the U.S., markets reopened after being closed for Good Friday last week.

See: Which stock markets and other asset trading exchanges are closed on Good Friday? Easter Monday?

What are Treasurys doing?

The 10-year Treasury note yield TMUBMUSD10Y, 0.767% was up 2.7 basis points to 0.749%, while the 30-year bond yield TMUBMUSD30Y, 1.407% climbed 4.1 basis points to 1.389%. The two-year note yield TMUBMUSD02Y, 0.243% rose 1.6 basis points to 0.241%.

Bond prices move in the opposite direction of yields.

What’s driving Treasurys?

Investors were watching the death toll rise in the U.S. from COVID-19. Deaths from the infection in New York City, which has emerged as the epicenter in the U.S., topped 700 on Sunday for a sixth straight day. However, the number of hospitalizations has continued to slow, offering muted signs of hope.

The head of the Centers for Disease Control and Prevention, Robert Redfield, said cases of COVID-19 had “stabilized,” and said the U.S. was nearing the peak of the outbreak.

Still, the big question for market participants and economists is what will the economy look like after forced closures are unwound.

On Sunday, the Organization of the Petroleum Exporting Countries, Russia and the U.S. completed a deal that would see global output cut by 9.7 million barrels a day beginning in May. West Texas Intermediate crude CL.1, -1.62% dipped slightly.

The deal ends a month-long price war between Saudi Arabia and Russia that flooded the world with unneeded crude and intensified a meltdown in oil prices, but stocks still headed lower Monday as investors feared that the cuts may not be sufficient to tamp down a glut in the market resulting from the shocks to demand amid the viral outbreak.

Bond prices can be sensitive to moves in oil because it can impact the outlook for inflation.

See:After worst week of coronavirus deaths, New York starts to see signs of hope

Risk appetite appears to be abandoning investors for the moment, with the Dow Jones Industrial Average DJIA, -1.38% and the S&P 500 index SPX, -1.01% falling sharply and gold GC.1, +0.89% hanging around the highest levels in more than seven years. Still, souring investor sentiment didn’t bolster demand for haven assets amid continuing questions on the outlook for the coronavirus and the U.S recovery.

What are analysts saying?

“The dearth of economic data combined with the middling technical profile left U.S. rates adrift on an ocean of uncertainty; in such an environment it follows intuitively that both yields and risk assets would be struggling to find a new equilibrium,” said Ian Lyngen, head of U.S. rates strategy at BMO Capital Markets, in a note.