Yields on 10-year US Treasuries fall to a low of 1.50% as lockdown fears in Europe trigger broad safe-haven supply

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  • Bond yields have moved sharply lower on Friday amid a bid for safe-haven assets as Europe heads toward lockdown.
  • The 10-year US Treasury yield fell back to 1.55%.

US bond yields saw a sharp drop on Friday, the main catalyst for which was a continued rise in concerns about lockdowns in Europe, where Covid-19 infection / hospitalization rates continue to rise. Fall in bond yields / rally in bond prices reflects a broader outperformance of safe haven assets on Friday. The 10-year US Treasury yield fell more than 6 basis points to 1.52%, now more than 13 basis points below the previous weekly highs of 1.65%. Falls of similar magnitude were observed along the Treasury curve. The 2-year yield fell 5 basis points to 0.45%, nearly 10 basis points below previous weekly highs, the 7-year yield fell 7 basis points to 1.40%, and the 30-year yield fell 5 basis points to 1.92% .

Austria became the first major Western European nation on Friday to announce the re-imposition of strict lockdown measures from early 2021, which will begin on Monday and will last at least 20 days. Germany’s health minister refused to rule out that Germany could do the same, saying the pandemic situation there was becoming increasingly dire.

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Some market participants expressed fear that the United States was heading down a similar path. The seven-day moving average of reported Covid-19 infections per day in the US has been trending up in November. Having fallen to the low of 70,000 in late October / early November, the seven-day moving average is now approaching 100,000.

Reuters analysts said the recent rate volatility is “likely exaggerated by the deteriorating liquidity that has hit the market in recent weeks” which, they said, is due “in part to hedge funds being burned out by volatile movements in October and November have been withdrawn from the market. ” Reuters warned that “liquidity is also expected to worsen next week before the market closes on Thursday for Thanksgiving.”

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