Bond Report: Treasury yields climb on reports of progress toward virus treatment

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Treasury yields rose on Wednesday amid reports that researchers had made progress in coming up with cures and treatments for the rapidly spreading coronavirus. The rise was extended after an estimate of private-sector jobs growth.

What are Treasurys doing?

The 10-year Treasury note yield TMUBMUSD10Y, +2.97% rose 5 basis points to 1.651%, while the 2-year note rate TMUBMUSD02Y, +2.27% was up 3.2 basis points to 1.447%. The 30-year bond yield TMUBMUSD30Y, +1.95% climbed 4.6 basis points to 2.126%.

What’s driving Treasurys?

Some of the coronavirus fears abated amid efforts by scientists to develop drugs to counter the virus. Researchers at Zhejiang University said they found an effective drug to treat coronavirus patients, according to a Chinese newspaper. A British team of scientists have also claimed that they shortened a part of the development time for a vaccine.

Still, the World Health Organization has said that there are “no known effective therapeutics” against the virus, in response to the media reports.

The number of coronavirus cases have continued to march higher. China’s National Health Commission reported more than 24,000 confirmed cases and 490 deaths within the country.

Traders faced a rush of economic data in the morning. Automatic Data Processing said the U.S. economy added 291,000 private-sector jobs in January. The December trade deficit fell 1.7% in 2019, its first annual decline in six years, reflecting the impact of U.S. tariffs on Chinese goods.

The Institute for Supply Management will release its January nonmanufacturing gauge at 10 a.m. ET, providing a snapshot of the service sector’s health.

As for the Federal Reserve, Gov. Lael Brainard will speak later at 4:10 p.m. Traders of fed fund futures had started to price in increased odds of a rate cut this year following the pathogen’s outbreak, but improving manufacturing data has weighed on the case for further monetary easing.

What did market participants’ say?

“Tremendous selling hit [Treasury ]prices early this morning on China reports of promising early results from a treatment for coronavirus. Headlines that it was a ‘vaccine”’sparked the stampede as a vaccine would imply quarantines could ease faster than expected,” wrote Jim Vogel, an interest-rate strategist at FHN Financial.

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