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Treasury Yields Fall After Jobs Data -- Update

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07/16/2020 | 04:01pm EDT

By Sebastian Pellejero

U.S. Treasury yields fell Thursday after data showed the number of Americans who filed for unemployment benefits last week was higher than economists expected.

The yield on the benchmark 10-year Treasury note fell to 0.611%, according to Tradeweb, from 0.629% on Wednesday. The 30-year bond yield followed a similar path, finishing the trading day at 1.302% from 1.330% Wednesday. Bond yields fall when prices rise.

Yields declined after Labor Department data showed the number of Americans filing for jobless benefits held nearly steady last week at 1.3 million, higher than the 1.25 million figure economists had anticipated. While new jobless claims have eased from their peak in late March, 17.3 million Americans continue to receive unemployment benefits, as companies remain cautious about hiring.

Meanwhile, new data from the Commerce Department Thursday showed U.S. retail sales increased by 7.5% in June, driven by a pickup in sales at motor vehicle dealers, furniture, clothing and electronic stores. Retail spending totaled $524.3 billion last month, up from $487.7 billion in May and nearly back to pre-pandemic levels.

Ultralow long-term yields indicate investors expect short-term interest rates to remain near zero for an extended period. Analysts said investors continue to buy Treasurys out of fear that the U.S. economy could take a long time to recover. Investors are also confident that the Federal Reserve will continue to support the economy by buying Treasurys and keeping short-term rates low.

Some analysts said investors are more likely to buy Treasurys now that the yield on the 10-year note is trading within a relatively narrow range, after rising to near 1% in early June.

"As the 10-year yield stays firm between 0.6% and 0.7%, investors are less fearful of buying Treasurys," said Jim Vogel, interest-rate strategist at FHN Financial. "Investors are putting money to work on a more disciplined basis now that a lot of their immediate concerns are taken care of."

Investors are becoming increasingly concerned that any further recovery in the U.S. could be stymied by the recent surge in coronavirus infections. New cases in the U.S. rose by more than 66,000 on Wednesday, as hospitals in Texas, California and other states continue to accommodate an increase of new patients.

While last month's bounceback in consumer spending was encouraging, the data is "offset by the disturbing resurgence in infections across the South and West, which threatens to send nervous shoppers back to their homes in coming months amid still-high joblessness," said BMO Capital Markets analysts in a note.

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

 

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