March 10, 2020 / 2:09 PM / 22 days ago

U.S. Treasury yields head higher with talk of economic stimulus

CHICAGO - U.S. Treasury yields rose from all-time lows on Tuesday as global oil and stock markets rebounded on optimism that governments would take steps to reboot economies impacted by the global spread of coronavirus.

The 10-year note yield US10T=RR was last at 0.8046%, more than double Monday’s record low yield of 0.318%.

“You do have some further talk of fiscal stimulus in the United States and Europe and Japan that’s giving some confidence,” said Stan Shipley, fixed income strategist at Evercore ISI in New York.

U.S. stock indices were higher on stimulus hopes, recovering some of the losses they suffered during Monday’s biggest one-day percentage fall.

President Donald Trump and Republican lawmakers discussed stimulus plans to bolster the economy on Tuesday afternoon. At an earlier White House meeting with healthcare executives, Trump said his administration intended to help airlines and the cruise line industry.

Oil also regained some losses from Monday’s biggest one-day decline since the 1991 Gulf War as the possibility of economic stimulus encouraged buying and Russia signaled that it may yet hold talks with OPEC about cooperation on output cuts.

Thirty-year Treasury yields, which fell to a record low of 0.702% US30YT=RR on Monday, last traded at 1.3045%.

After tumbling to a 5-1/2-year low of 0.251% on Monday, two-year Treasury yields US2YT=RR were trading at 0.5461%.

The spread between the 10-year and three-month Treasuries yields touched 34.2 basis points, the yield curve’s widest since Jan. 2, recovering from an inversion that markets interpret as a signal of looming recession.

The Treasury Department saw soft demand for a $38 billon sale of three-year notes, with especially weak interest from direct bidders. These include large central banks such as China’s and Japan’s, and some fund managers.

Direct bidders took only 3.71% of the sale, while indirect bidders took 52.26% and dealers bought 44.03% of the notes.

The Treasury will also sell $24 billion of 10-year notes on Wednesday and $16 billion of 30-year bonds on Thursday.

“If there is kind of tepid demand, maybe that leads to yields moving a little higher,” said Collin Martin, a fixed income strategist at Schwab Center for Financial Research in New York.

“Given that our yields, at their very, very low level, are still positive and above those of places like Japan and Germany, that’s likely to keep demand pretty strong,” Martin added.

By Karen Pierog in Chicago and Karen Brettell in New York; Editing by David Gregorio, Will Dunham and Dan Grebler

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