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U.S. Government-Bond Yields Rise as Economies Reopen

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05/26/2020 | 12:55pm EDT

By Sebastian Pellejero

U.S. government-bond yields climbed Tuesday, lifted by investors' optimism over resumed economic activity around the world.

The yield on the benchmark 10-year U.S. Treasury note rose toward the high end of its recent range and recently traded at 0.698%, according to Tradeweb. That compares with 0.659% at Friday's close.

Yields, which rise when bond prices fall, climbed with global stocks amid signs of a pickup in spending on hotels, restaurants, and airlines in the U.S., as well as a decline in the daily number of new coronavirus infections.

"Sentiment has changed for the positive over the last week or two," said Larry Milstein, head of government and agency trading at R.W. Pressprich & Co. "With risk markets improving and there being a tremendous deficit that the U.S. government has to fund, we could see Treasurys go higher, and certainly approach 1% on the 10-year note."

The Federal Reserve's plans to slow its purchasing of Treasurys could also help drive yields higher, said Mr. Milstein. The Fed plans to purchase around $20 billion in Treasury securities this week, down from $30 billion last week and $35 billion two weeks ago.

The yield on the 10-year note, which tends to move along with expectations for economic growth and inflation, has remained stalled around two-thirds of a percentage point recently, a sign of investors' fears about the pandemic's long-term hit to the economy.

U.S. corporate bonds gained on Tuesday. BlackRock's iShares U.S. investment-grade corporate bond exchange-traded fund climbed 0.2%, according to FactSet, while its high-yield ETF jumped 1.1%.

As of Friday, the average extra yield investors demanded to hold investment-grade corporate bonds over Treasurys was 1.82 percentage points.

The U.S. dollar weakened. The WSJ Dollar index, which measures the dollar relative to 16 other currencies, fell 0.8% to 92.89 Tuesday, according to Dow Jones Market Data.

Write to Sebastian Pellejero at sebastian.pellejero@wsj.com

 

Stocks mentioned in the article
ChangeLast1st jan.
EURO / US DOLLAR (EUR/USD) 0.05% 1.12419 Delayed Quote.0.35%
RISE, INC. 6.90% 31 End-of-day quote.3.33%
THE GLOBAL LTD. 0.97% 209 End-of-day quote.-55.63%
WORLD CO., LTD. -1.19% 1496 End-of-day quote.-44.41%
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