By Julia-Ambra Verlaine
U.S. government yields continued to inch lower as investors warily eye rising coronavirus cases and health authorities in other countries say they are facing a second wave of infections.
The yield on the benchmark 10-year U.S. Treasury note dropped to 0.684% Monday, according to Tradeweb. That compares with 0.696% on Friday. Yields have declined over the past two weeks as investors grapple with doubts over the economic recovery, the future of Covid-19 and concerns around resurgent trade tensions with China.
The U.S. death toll from the virus neared 120,000, as total coronavirus infections world-wide topped 8.9 million, according to data compiled by Johns Hopkins University. Meanwhile, Jeong Eun-kyeong, director of the Korea Centers for Disease Control and Prevention, said Monday that a holiday weekend in May marked the start of a fresh wave of infections in the Seoul metropolitan area.
Bond markets have been stuck in recent weeks, caught between positive economic data -- including buoyant retail sales in May -- and a swath of unknowns as the U.S. begins to reopen its businesses. Investors are awaiting numbers around manufacturing activity Tuesday and other data to further guide them.
"The same tug of war exists in the market with positioning, stimulus, and the fear of missing out," said Adam Crisafulli, founder of market-intelligence firm Vital Knowledge. "If the jobless data hold steady again that could raise worries that the U.S. labor-market improvement has come to a halt."
Analysts across Wall Street remain cautious on the status of the U.S. economy.
Economists at JPMorgan Chase & Co. expect the unemployment rate to remain at 10% or above through the end of the year. While they revised their estimate of annualized real gross domestic product in the second quarter up to a contraction of 31%, from a contraction of 40%, after a strong May retail sales number, they see a number of persistent near-term risks that could roil markets -- notably an uptick in coronavirus infections and a looming presidential election.
"On a macro level, we're not out of the woods yet," said Alex Roever, head of U.S. rates strategy at JPMorgan. Most traders and investors expect yields to remain low, or within a range as the Federal Reserve pledges it will do what it takes to keep long-term rates from rising.
If yields do move higher, it is likely a result of supply dynamics rather than optimism as the Fed issues record amounts of debt to support the economy. JPMorgan analysts expect $4.8 trillion net issuance of Treasurys, driven mostly by deficit spending.
Write to Julia-Ambra Verlaine at Julia.Verlaine@wsj.com