U.S. Treasury yields fell on Thursday morning after the House of Representatives passed the $1.9 trillion stimulus bill, and ahead of weekly jobless claims data.
The yield on the benchmark 10-year Treasury note dropped to 1.48% at 4 a.m. ET. The yield on the 30-year Treasury bond dipped to 2.221%. Yields move inversely to prices.
It comes after a key 10-year Treasury auction Wednesday eased investor concerns about a fall in demand for government debt.
Investors will be keeping an eye on Thursday’s auction of $24 billion of 30-year bonds, as a gauge on demand for longer duration government debt. Auctions will also be held Thursday for $30 billion of four-week bills and $35 billion of eight-week bills.
Weekly jobless claims data is due out at 8:30 a.m. ET on Thursday, with economists surveyed by Dow Jones expecting 725,000 new claims.
Meanwhile, data showing the number of job openings in January is expected to be released at 10 a.m. ET.
Stimulus package
When it comes to the stimulus package, Willem Sels, chief investment officer, private banking and wealth management at HSBC, said the bond market was trying to assess whether it will prove to be inflationary. Bond yields have been rising rapidly over recent weeks amid fears about rising inflation.
“However, in our view, inflation is mainly rising because of oil prices, temporary supply side bottle necks and the weakening of the US dollar in recent months,” Sels said.
The U.S. government’s spending package was actually “probably more deflationary than inflationary,” he argued, adding that he believed the bond market had “sold off too much in anticipation of the fiscal package.”
Meanwhile, Charalambos Pissouros, senior market analyst at JFD Group, highlighted that while February’s consumer price index, out Wednesday, rose year-on-year as expected, the core rate actually ticked lower.
“This adds more credence to the Fed’s view that it will take some time for inflation to rise and stay above 2% for some time,” he said, pointing to the central bank’s projection that this will happen in the years after 2023.
“It also validates our view that the recent retreat in equities due to higher yields was just a corrective phase, and that they were likely to rebound and continue trending north,” Pissouros said.
Not everyone is convinced, however, with ING senior rates strategist, Antoine Bouvet, telling CNBC on Wednesday that the 10-year U.S. Treasury yield was likely to hit 2% by the end of the year but could spike “well above” that in the second quarter.
— CNBC’s Jesse Pound contributed to this report.
