Treasury Yields Climb After Hitting Lowest Levels Since Spring -- 4th Update

Long-term Treasury yields finished the day higher Friday but not before dipping to fresh multimonth lows earlier in the session, the latest sign of how rising coronavirus cases are driving demand for ultrasafe government bonds.

The yield on the benchmark 10-year U.S. Treasury note traded as low as 0.571%, its lowest intraday level since April 21, before recovering to close at 0.633%, according to Tradeweb, compared with 0.605% on Thursday.

The yield on the 30-year Treasury bond touched its lowest intraday level since early May, falling as low as 1.249% before settling at 1.326%.

Ultralow long-term yields indicate investors expect short-term interest rates to remain near zero for a prolonged period. Yields, which move in the opposite direction of bond prices, had climbed in early June when investors were more optimistic about the economy emerging from coronavirus lockdowns.

Investors are monitoring rising coronavirus cases and the likelihood of further lockdowns curtailing the recent economic recovery. New coronavirus cases in the U.S. rose by more than 63,000 on Thursday, another single-day record, as hospitals in Texas, California and other states strained to accommodate a surge of new patients.

"You have increased uncertainty globally, and you have more savings, so investors are looking to put money to work in a more conservative way," said Andrey Kuznetsov, senior credit portfolio manager at Federated Hermes. "As a result this drives demand" for bonds, he said.

Bond yields have edged lower even as governments have issued more debt to fund relief efforts to combat the economic impact of the coronavirus. In the U.K., the yield on the five-year gilt, as British government bonds are known, hit a record low Friday of minus 0.092%. Investors there anticipate that the Bank of England will implement negative policy rates in the future.

Despite continued demand for safe assets, volatility in U.S. bond markets has fallen to levels near those seen before the coronavirus pandemic. The MOVE Index, a measure of Treasury yield volatility implied by options prices, fell to 50 on Friday after surpassing 150 at the height of the March selloff.

The drop is in large part due to measures taken by the Federal Reserve and other central banks to backstop credit and funding markets, Mr. Kuznetsov said.

In stock markets, by contrast, a popular measure of future volatility known as the Cboe Volatility Index, or the VIX, has remained elevated. Stock-market investors worry that markets could return to their dramatic swings from earlier in the year. Further lockdowns to stem the spread of the coronavirus could rattle fragile investor confidence, driving demand for safer assets, analysts and investors said.

Write to Caitlin Ostroff at caitlin.ostroff@wsj.com and Sam Goldfarb at sam.goldfarb@wsj.com


  (END) Dow Jones Newswires
  07-10-20 1704ET
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