Bond Report: Treasury yields slide as jobless claims surge to record of 6.6 million

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U.S. Treasury yields headed lower on Thursday after a back-to-back jump in U.S. weekly jobless claims, closing the curtain over one of the strongest labor markets in American economic history.

What are Treasurys doing?

The 10-year Treasury note yield TMUBMUSD10Y, +2.37%   fell 4.9 basis points to 0.586%. The 2-year note rate TMUBMUSD02Y, +7.33%   was down 1.2 basis points to 0.222%. The 30-year bond yield TMUBMUSD30Y, +1.58%   slipped 4.7 basis points to 1.242%.

What’s driving Treasurys?

Americans filing for unemployment benefits for the weekly period ending March 28 surged by 6.65 million, following a 3.28 million rise in initial jobless claims in the week before. Economists polled by MarketWatch had forecast claims to surge by 4 million.

See: Jobless claims leap record 6.6 million at end of March as coronavirus triggers mass layoffs

As an up-to-date indicator of the job market’s travails, the claims number highlights the disruptions that are threatening to throw the world’s largest economy into a recession.

In other data, the trade deficit fell $39.9 billion in February, down from $45.3 billion in January.

The Federal Reserve temporarily eased capital requirements for banks on Wednesday, allowing them to increase their balance sheets and lend out funds to households and businesses.

The Fed’s actions could also encourage the primary dealer banks that facilitate trading in the bond-market to ramp up their operations and soothe liquidity issues that briefly seized up liquidity in the Treasurys market last month, analysts said.

What did market participants’ say?

“More people are applying for unemployment insurance as more segments of the economy are shutting down in the wake of the coronavirus,” said Andrew Smith, chief investment officer of Delos Capital Advisors, in a note.

“Companies will take a considerable amount of time to re-hire workers. The longer it takes for the economy to restart, the longer companies will take to get back into gear,” said Smith.

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