U.S. Treasury prices soared on Friday, pushing long-dated yields to fresh record lows, as concern that the coronavirus outbreak will hammer the world economy sent investors fleeing to assets seen as safe havens in turbulent times.
A strong U.S. non-farm payrolls report for February pushed yields slightly higher from lows, but the Treasury market kept its bullish undertone.
Nonfarm payrolls increased by 273,000 jobs last month, matching January’s tally, which was the largest since May 2018.
While transportation and warehousing payrolls fell by 4,000 jobs last month, showing some early impact from the coronavirus, they were more than offset by strong gains nearly across all other sectors, including government. The economy created 85,000 more jobs in December and January than previously reported.
“It’s a very good jobs number. This has been the story for the last couple of years,” said Gregory Faranello, head of U.S. rates at AmeriVet Securities in New York.
“We’ve had a lot of global uncertainty, at the same time, the U.S. economy has done very well. A lot of the downdraft benefited the U.S. consumer.”
But the jobs report has been overshadowed by growing market panic caused by the coronavirus, which so far has infected more than 100,000 people globally, according to a Reuters tally. That number could rise as more people get tested.
“Treasuries were rallying before the non-farm payrolls and since the release, we’ve seen the bulk of the price action retained,” said Ian Lyngen, head of U.S. rates strategy at BMO Capital Markets in New York.
“From there, the market will be sensitive to incoming Covid-19 (coronavirus) headlines and we anticipate a reluctance to go home short Treasuries for the weekend,” he added.
New milestones were set across the U.S. bond market, which has this week seen some of its biggest moves in years.
The 10-year Treasury yield fell to a record low of 0.695 per cent and was last down at 0.712 per cent.
The 30-year Treasury yield dropped more than 20 bps to a record low of 1.278 per cent. It was on course for its biggest daily fall since late 2011 during the depths of the euro zone sovereign debt crisis.
Short-dated U.S. bonds racked up sizable moves of their own, with two-year Treasury yields falling more than 10 basis points to 0.439 per cent, their lowest since 2015. They were last at 0.454 per cent
Two-year bond yields have tumbled 87 bps in the past two weeks in their biggest two-week drop since 1987.
Coronavirus spread across the United States on Thursday, surfacing in at least four new states.
The prospect of a prolonged economic slowdown globally whacked equity markets and with a weekend looming, investors were heading to the relative safety of government bonds.