Treasuries fluctuated in morning trading after an early advance but moved back to the upside over the course of the afternoon.
Bond prices moved roughly sideways going into the close, hovering near their best levels of the day. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, dipped 2.5 basis points to 0.829 percent.
Treasuries benefited from the appeal as a safe haven amid concerns about the near-term economic outlook amid a continued spike in new coronavirus cases in the U.S.
The latest data from John Hopkins University showed nearly 188,000 new coronavirus cases on Thursday, while the daily death toll topped 2,000 for the first time.
The continued surge in new cases, hospitalizations and deaths in the U.S. has raised concerns new restrictions and lockdowns will dampen the economy recovery.
While there continues to be upbeat news on the vaccine front, traders seem worried about an economic downturn the months leading up to the widespread distribution of a vaccine.
Adding to the economic uncertainty, Treasury Secretary Steven Mnuchin announced a decision to allow five of the Federal Reserve’s nine emergency lending programs to expire at the end of the year.
The Fed responded to the decision in a rare public statement, saying it would prefer that the full suite of emergency facilities established during the coronavirus pandemic continue to serve their important role as a backstop for the still-strained and vulnerable economy.
While Mnuchin has argued he is following the intent of Congress, Gregory Daco, Chief U.S. Economist at Capital Economics, suggested the Treasury Secretary is hoping lawmakers will consider reallocating the unused funds for new stimulus measures.
“However, with partisanship in Congress preventing the delivery of urgently needed fiscal aid, and low rates negating any imminent debt servicing concern, Mnuchin’s justification appears poorly grounded,” Daco said.
He added, “And, it may backfire by leaving the Fed as the only adult in the room to address a concerning economic situation in the final stages of 2020.”
News on the coronavirus front may continue to be in the spotlight next week, although traders are also likely to keep an eye on reports on consumer confidence, durable goods orders, personal income and spending, and new home sales.
The minutes of the latest Federal Reserve meeting may also attract some attention along with the results of the Treasury Department’s auctions of two-year, five-year and seven-year notes.
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