Most US Treasury yields fell on Tuesday as investors moved out of stocks and eyed challenges many countries still face from the COVID-19 pandemic.
The benchmark 10-year yield was down 3.7 basis points at 1.562% in early afternoon trading after spending much of the morning near 1.6%.
Yields fell as the S&P 500 and the Dow traded lower for a second straight day, with investors pinning their hopes on results from Netflix Inc and other major tech-related companies this week to help sustain an upbeat start to the earnings season.
Tufts University economist Brian Bethune said the lower yields stood in contrast with their level close to 1.8% on March 30, reflecting worries that public health gains against the coronavirus have stalled in Brazil, Canada and other countries.
“There’s a repricing of what the international environment is going to look like,” even though the U.S. economic recovery looks strong, Bethune said.
The benchmark yield remained above its multi-week low of 1.528% reached April 15. Investors will watch the results of a $24 billion auction of 20-year bonds by the U.S. Treasury set for Wednesday.
Federal Reserve Chair Jerome Powell said the U.S. economy will temporarily see “a little higher” inflation this year as activity strengthens and supply constraints push up prices in some sectors, but the Fed is committed to keeping any overshoot within limits, according to an April 8 letter seen by Reuters.
A closely watched part of the U.S. Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes, seen as an indicator of economic expectations, was at 140.80 basis points, about 1 basis point lower than Monday’s close.
The two-year U.S. Treasury yield was down less than a basis point at 0.153%.
In the overnight repurchase market, the repo rate fell to 0.1% on Tuesday from 0.3% the previous session, weighed down by the influx of cash from government state enterprises Fannie Mae, Ginnie Mae and Freddie Mac.
Each month, around the 18th, Fannie, Freddie and Ginnie invest cash in the repo market during the period when they receive mortgage payments from homeowners, until they make their principal and interest payments on the 24th to the mortgage-backed security holder.