Treasury yields rallied off session lows to stretch gains for U.S. government data Wednesday to a second trading, as markets fell over an obvious lack of fiscal measure from U.S. policymakers.
As this developed, legislators and the Trump administration collided on possible steps to soften the COVID-19 pandemic's economic blast, but indicated proposals might not be immediately crafted.
The yield on 10-year Treasury bonds, which shifts inversely with market prices, was up 6 basis points to 0.84 percent in volatile sessions. The yield on 30-year Treasury notes also rose at approximately 1.34 percent.
As world stock markets fell, capitalists scrambled to the comfort of bonds to offset the economic jolt of the pandemic, and oil plummeted over 25 percent after Saudi Arabia opened its taps in a price dispute with Russia.
Investors are confused about the equity-market selloff, as weakness in global shares tend to push bidding up for government loans. A successful bid for $24 billion worth of 10-year equities helped to cushion the sluggishness in Treasurys.
US President Donald Trump pitched a zero-percentage payroll tax rate for workers and employees for the rest of 2020 to address the pandemic. The move would be in addition to an $8.3 billion budget package approved last week.
According to Peter Chatwell, director of rates planning at Mizuho in London, the levels that investors are witnessing in U.S. Treasury yields are "not detached from reality." Chatwell also said that there is a virus spreading across the world and efforts taken to contain that spread will materially hamper economic activity and "we already had a soft world economy."
With the lack of clear catalysts for increasing yields, some investors and market observers pointed to the absence of liquidity in the equity market and noted some capitalists could be shutting their positions, and unloading any Treasurys they possess. All key U.S. bond benchmarks dropped over 5 percent on Wednesday.
The Bank of England has trimmed down its interest rates by 50 basis points to revise loans to their lowest on record, in its first critical decision since the financial turmoil. The move follows a similar trend from the US central bank earlier this month.
On the global data front, the consumer price index for February climbed 0.1 percent and is up 2.4 percent from 2019. Core inflation, not including volatile commodity and energy costs, rallied 0.3 percent and soared 2.5 percent year-over-year.
Meanwhile, some analysts believe that, likely many factors involved, one may be linked to panic selling. Exchange traded and mutual funds comprise a huge portion of overall assets. People selling their ETFs in panic will ultimately cut the value of underlying equities because of lack of demand.
