NEW YORK, Oct 28 (Reuters) - U.S. Treasury yields were roughly unchanged across maturities on Wednesday afternoon, as expectations of heavy issuance of new supply offset safe-haven demand amid a dramatic stock sell-off that brought major U.S. stock indexes to one-month lows.
Risk assets on Wednesday fell as coronavirus infections surged across the globe and investors expressed some nervousness about the U.S. election. Wall Street’s main indexes briefly lost more than 3% as new cases and hospitalizations set records in the U.S. Midwest, and France and Germany planned shutdowns.
Treasury yields, which are typically driven lower in moments of market volatility by safe-haven demand, were flat on Wednesday afternoon. The benchmark 10-year yield was last unchanged on the day at 0.778%. The two-year yield was last down 0.3 basis point to 0.149%, steepening the yield curve modestly.
“The move is anemic. Yields are effectively unchanged,” said Andrew Brenner, head of international fixed income at NatAlliance Securities.
“It is because of supply. There is going to be a lot of supply whether Trump wins or Biden wins. There is going to be stimulus.”
The Treasury Department has issued roughly $3.4 trillion of new public debt since the start of the coronavirus pandemic, according to Refinitiv Eikon. That debt has financed the stimulus endeavors passed by Congress in addition to normal government programs.
More stimulus is expected to be passed regardless of who wins the White House on Nov. 3, suggesting the heavy supply of new debt will continue, keeping prices anchored and yields bolstered even in moments of safe-haven buying.
“Treasuries are not a good hedge for equities. Treasury rates are low. There is too much supply on the horizon,” said Brenner.
Ian Lyngen, head of U.S. rates strategy at BMO Capital Markets, also noted that moves in the Treasury market were likely to remain range-bound until after the presidential election, which because of high levels of mail-in voting may be fought out in the courts if there is no immediate definitive result. (Reporting by Kate Duguid Editing by Marguerita Choy and Nick Zieminski)
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