July 15, 2020 / 7:15 PM / in a month

TREASURIES OUTLOOK-Yield rise as COVID vaccine hopes boost risk appetite

NEW YORK, July 15 (Reuters) - U.S. Treasury yields rose and the yield curve steepened on Wednesday as hopes of a COVID-19 vaccine boosted risk appetite and reduced demand for safe-haven bonds.

Moderna Inc’s experimental vaccine for COVID-19 showed it was safe and provoked immune responses in all 45 healthy volunteers in an ongoing early-stage study, U.S. researchers reported on Tuesday.

“The market is trading fairly ‘risk on’ on vaccine hopes,” said Gennadiy Goldberg, an interest rate strategist at TD Securities in New York. “It’s largely COVID news driving the price action recently.”

Investors are wary about new economic damage as a sharp rise in COVID infections in many U.S. states leads to new shutdowns aimed at stemming the spread of the virus.

Benchmark 10-year notes rose two basis points to 0.630%. They have held in a tight range from 0.569% to 0.784% since mid-June.

The yield curve between two-year and 10-year notes steepened one basis point to 47 basis points.

A Federal Reserve report on Wednesday showed that U.S. businesses saw an uptick in activity into the beginning of July as states eased restrictions to contain the novel coronavirus pandemic, but many businesses were uncertain about the economic outlook.

The United States has failed to control the coronavirus and there is a high level of uncertainty over how much the pandemic will affect the economy, Philadelphia Federal Reserve Bank President Patrick Harker said on Wednesday.

Data showed that U.S. factory output rose 7.2% in June, the most in more than 74 years, as motor vehicle production accelerated amid the reopening of businesses, but the nascent recovery in manufacturing activity was overshadowed by surging new COVID-19 infections.

The next major economic focuses are jobless claims and retail sales on Thursday.

Reporting by Karen Brettell; editing by Jonathan Oatis and Leslie Adler

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