U.S. Treasury yields inch lower as investors turn cautious


U.S. Treasury yields fell slightly in early Wednesday trade as optimism about riskier assets eased amid delays to drugmakers’ plans to develop a COVID-19 cure and continued wrangling over a new coronavirus aid relief package in Washington.

What are Treasurys doing?

The 10-year Treasury note yield
TMUBMUSD10Y,
0.718%
fell 1 basis points to 0.717%, while the 2-year note rate
TMUBMUSD02Y,
0.141%
was at 0.141%. The 30-year bond yield
TMUBMUSD30Y,
1.491%
slipped 2.1 basis points to 1.493%. Bond prices move inversely to yields.

What’s driving Treasurys?

Government bond prices edged up as fiscal stimulus negotiations showed a lack of progress, with Senate Majority Leader Mitch McConnell saying he would launch a vote on a targeted COVID relief package worth around $500 billion. Analysts say the Republican proposal is likely to founder as it represents a much lower figure than Democrat lawmakers proposed.

On Tuesday, drugmakers Eli Lilly and Johnson & Johnson reported pauses to their clinical trials for their COVID-19 treatment and vaccine candidate, respectively.

The rebound of the eurozone’s manufacturing sector was losing steam, as industrial production grew 0.7% in August compared with the previous month.

The 10-year German government bond yield
TMBMKDE-10Y,
-0.576%,
a proxy for the broader European bond market, fell 2.7 basis points to negative 0.583%.

Global infections of COVID-19 continued to tick higher, sparking worries that more countries will be forced to reinstate punishing lockdowns that dented economic activity in the first half of this year.

The U.S. data calendar was thin on Wednesday. The September producer price index climbed 0.4%.

What did market participants say?

” It doesn’t seem controversial to say that the [Republican] bill stands no chance of being passed by the Democrat controlled lower house,” said analysts at Rabobank.



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