U.S. government bond yields rallied before stabilizing on Friday, fluctuated by the president’s positive Covid-19 test, lackluster jobs report and hopes for further stimulus from lawmakers.
The yield on the benchmark 10-year Treasury note closed at 0.694%, according to Tradeweb, up from 0.677% on Thursday. The yield on 30-year bonds increased to 1,480%, from 1,454%. Bond yields fall as prices rise.
Those moves reversed previous declines that occurred after President Trump tested positive for Covid-19, adding more uncertainty to an election campaign that already has markets bracing for a surge in volatility in November. The rise in yields surprised traders, who were grappling with data showing a slowdown in job creation. Employers added 661,000 jobs in September, the Labor Department said, below economists’ expectations of around 800,000.
Several analysts attributed the reversal to comments from House Speaker Nancy Pelosi, expressing confidence that lawmakers will reach agreement on further economic stimulus measures.
“The market is trying to digest a lot of news all at once and is jumping from one issue to the next,” said Gennadiy Goldberg, US rate strategist at TD Securities in New York. “The negotiation session has started on President Trump, but now it comes to stimulus due to some very positive comments from President Pelosi.”
While yields have been relatively stable for months, investors will face multiple crosswinds in the coming weeks, from upcoming elections to legislation on potential stimulus. This has traders harvesting derivatives related to everything from the Cboe Volatility Index, or VIX, to the Japanese Yen. “The bond and equity markets usually don’t do well with uncertainty, and today we have introduced more than expected,” said Kevin Giddis, chief fixed income strategist at Raymond James.
Write to Julia-Ambra Verlaine at [email protected]
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Appeared in the print edition of 3 October 2020 as “Yields Rise in Volatile Trading”.