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Treasury Yields Climb on Hopes of Economic Rebound in 2H20

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Things have been looking up for the bond market, with U.S. Treasury yields approaching the recent high notched on Wednesday, following upbeat economic reports. Notably, better-than-expected data on job losses and the services sector perked up markets, boosting investor optimism over an economic rebound.

Specifically, the rate on the 10-year Treasury bond has surged to 0.761%, marking the highest level since this April. Further, the yield on the 30-year Treasury bond has climbed to 1.551%.

Factors Driving Treasury Yields

Resilient global equity markets and positive economic data signal that the worst scenario of the economic downturn is soon to be over. Despite the U.S.-China tensions, civil disorder and fears of a second wave of coronavirus infections to hit the nation soon, investors moving toward safe-haven assets can see a ray of hope as stocks are starting to display a bullish momentum. Additionally, the steady reopening of states and cities, along with anticipations of an economic recovery in the second half of this year, has been keeping investors’ hopes high.

Therefore, the 10-year Treasury yield hit an eight-week high, pushing bond prices lower. It should be noted that bond prices and yields move in opposite directions.

The SPDR S&P Bank ETF (KBE - Free Report) and the SPDR S&P Regional Banking ETF (KRE - Free Report) gained 5.1% and 5.8%, respectively, on investor optimism. Markedly, among major and regional banks, Bank of America (BAC - Free Report) , Wells Fargo (WFC - Free Report) , JPMorgan (JPM - Free Report) , Citigroup (C - Free Report) , CIT Group (CIT), Huntington (HBAN - Free Report) and M&T Bank (MTB) turned green and jumped more than 4%.

Conclusion

The coronavirus pandemic has sent jitters across global markets, including the United States. Concerns over the pandemic’s negative impact on the U.S. economy escalated investors’ anxieties earlier and had caused the yield on benchmark 10-year Treasury note to sink since the virus outbreak. However, with the Fed’s support to the economy, hopes of an economic rebound as early as the later part of the year has kept investors’ optimism alive, pushing yields higher.

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