U.S. Treasury yields slipped early Wednesday as investors veered back into a more pessimistic view of the global economic outlook, ahead of a raft of data offering a snapshot of the downturn across households and industry.
What are Treasurys doing?
The 10-year Treasury note yield TMUBMUSD10Y, 0.687% fell 6.2 basis points to 0.688%, while the 2-year note rate TMUBMUSD02Y, 0.206% was down 1.8 basis points to 0.207%. The 30-year bond yield TMUBMUSD30Y, 1.328% slumped 7.9 basis points to 1.332%.
What’s driving Treasurys?
Global equity markets were on the backfoot amid reports that the economic toll from the COVID-19 pandemic could be deeper and more lasting than initially thought. The waning optimism in risk assets helped to buoy havens like U.S. government debt.
The British Chamber of Commerce showed that two-thirds of U.K. companies have put at least some staff on temporary government-funded leave. Meanwhile, a French official said the second largest economy in the eurozone could see an 8% decline in its annual gross domestic product in 2020.
The Stoxx Europe 600 index SXXP, -1.88% tumbled 1.8%, while Asian markets booked modest losses on Wednesday. U.S. stock futures were also heading for a lower start at the opening bell.
Traders will face a busy docket of U.S. economic data, with March retail sales, April Empire State manufacturing index and industrial production numbers for last month due in the morning.
The Fed will release its so-called Beige Book later in the afternoon. A collection of anecdotes from the central bank’s regional branches, it could offer further clues on how businesses all around the country are faring.
What did market participants’ say?
“The current optimism is vulnerable to set backs owing to the unpredictable progress of the virus and likely fails to fully incorporate both the extent of the economic damage (as activity remains strictly curtailed for some significant period) and the accompanying negative fallout that has yet to make itself felt,” said analysts at Rabobank.