U.S. Treasury yields slip after weak data underlines consumer weakness

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U.S. Treasury yields fell Friday after data from December pointed to the continuing economic pain, following renewed lockdown measures by some states to fight an intensifying COVID-19 pandemic.

What are Treasurys doing?

The 10-year Treasury note yield

tumbled 3.1 basis points to 1.097%, leaving it down 0.8 basis point for the week. The 2-year note rate

edged down 0.8 basis point to 0.137%, keeping it virtually unchanged over the past week.

The 30-year bond yield

slid 2.2 basis points to 1.852%, contributing to a 1.1 basis point weekly drop. Bond prices move inversely to yields.

What’s driving Treasurys?

The latest batch of data underlined the woes of U.S. consumers, the backbone of the economy, as the coronavirus pandemic remains a threat to business activity. Retail sales slid 0.7%, falling for a third straight month, while an index of consumer sentiment edged lower to 79.2 in January.

The performance of other sections of the economy were better. Industrial production surged 1.6% in December, and producer prices rose 0.3% last month.

Analysts said the widespread economic distress heightened the importance of further fiscal support.

But when Biden unveiled his proposed $1.9 trillion coronavirus aid package, it was met with little reaction as investors doubted his ability to pass the bill in its current form, even in a Democratic-controlled Congress. They noted measures such as an increase to the national minimum wage may not receive support from Republican lawmakers.

Lingering questions around the bill’s viability has led some market participants to push back the timetable for further fiscal aid.

Since Biden’s announcement on Thursday evening, U.S. bond yields have slipped as have equities.

What did market participants say?

“Until the COVID-19 pandemic is brought under control, the underlying durability of the recovery will remain in question. Stimulus can help to alleviate the immediate negative effects, but only temporarily. A durable recovery depends on a successful transition to a post-pandemic environment,” said Jim Baird, chief investment officer at Plante Moran Financial Advisors.

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