Treasuries moved sharply higher during trading on Monday, extending the upward move seen over the two previous sessions.
Bond prices gave back some ground after an initial jump but subsequently moved back to the upside. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, tumbled by 17.4 basis points to 0.764 percent.
The rally by treasuries came after the Federal Reserve announced extensive new measures to support the economy during the coronavirus pandemic.
Citing the tremendous hardship being caused by the outbreak, the Fed said it is committed to using its full range of tools to support households, businesses, and the U.S. economy overall in this challenging time.
The measures announced today include an unlimited expansion of the Fed’s asset purchases, with the central bank saying it will purchase Treasuries and mortgage-backed securities “in the amounts needed to support smooth market functioning and effective transmission of monetary policy to broader financial conditions and the economy.”
The Fed had previously announced it would purchase at least $500 billion of Treasury securities and at least $200 billion of mortgage-backed securities.
The central bank also announced the establishment of a new program that will provide up to $300 billion in new financing in an effort to support the flow of credit to employers, consumers, and businesses.
The Treasury Department will provide $30 billion in equity to these facilities using the Exchange Stabilization Fund.
The Fed will also establish two facilities to support credit to large employers, with the central bank to purchase corporate bonds issued by investment grade U.S. companies.
The financial crisis-era Term Asset-Backed Securities Loan Facility is also being reinstated to support the flow of credit to consumers and businesses.
Additionally, the Fed said it expects to announce the establishment of a Main Street Business Lending Program to support lending to eligible small-and-medium sized businesses, complementing efforts by the Small Business Administration.
“While great uncertainty remains, it has become clear that our economy will face severe disruptions,” the Fed said in a statement. “Aggressive efforts must be taken across the public and private sectors to limit the losses to jobs and incomes and to promote a swift recovery once the disruptions abate.”
Traders also kept an eye on developments in Washington, where lawmakers have thus far had difficulty agreeing on a massive fiscal stimulus bill.
Further developments regarding the bill could impact trading on Tuesday, as the Senate is hoping to vote on the package later today.