U.S. government-bond yields fell Tuesday, driven lower by investors’ concerns about the prospects for Brexit trade negotiations and a U.S. emergency economic relief package.
The yield on the benchmark 10-year Treasury note finished trading Tuesday at 0.913%, according to Tradeweb. That’s the second-straight session decline and down from 0.928% at Monday’s close. The 30-year yield fell to 1.659%, from 1.687% Monday.
Yields, which fall when bond prices rise, retreated Tuesday as investors waited for developments on the Brexit trade negotiations. U.K. Prime Minister
has warned that securing a trade deal at a coming summit with the European Union will be difficult before the Dec. 31 deadline. That uncertainty is driving some investors to havens such as U.S. Treasurys.
In the U.S., delays on bills covering economic relief and government spending are also pressuring yields, some analysts said. Lawmakers on Monday struggled to resolve stumbling blocks while seeking a deal on the emergency pandemic relief program. Congressional leaders said they plan to pass a one-week extension of government funding legislation to buy more time for negotiations.
Those strains have helped reverse a recent rise in Treasury yields, which tend to climb when investors expect economic growth and inflation. The prospect of a vaccine-fueled economic rebound recently helped push 10-year yields to their highest close in nearly a month near 1%, a level not surpassed since before the pandemic.
Investors already anticipate a stimulus package of more than $1 trillion, which should cap the climb in yields even if Congress reaches an agreement in coming weeks, says Larry Milstein, head of treasury and agency trading at R.W. Pressprich & Co.
“Investors have been waiting for stimulus for several months. I don’t think a $1 trillion aid package will move the 10-year yield past 1% at this point,” he said.
One factor that investors expect to help keep yields trading within a relatively narrow range: the Federal Reserve. The central bank has committed to aiding the economy by holding borrowing costs low—keeping short-term interest rates near zero and buying billions of dollars of bonds.
Some analysts said that made recent yields attractive enough to lure investors.
“As [the 10-year note] got up to the 0.95% level, that presented a good purchase point, with investors then looking to take profits as yields fell back down,” said Mr. Milstein. “Trading the range has been very profitable this year.”
Write to Sebastian Pellejero at firstname.lastname@example.org
Copyright ©2020 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8
Appeared in the December 9, 2020, print edition as ‘Brexit Worries Sink Bond Yields.’