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Bond Report: 30-year Treasury yield breaks below 2% as coronavirus disrupts supply chains

February 18
18:52 2020

U.S. Treasury yields declined on Tuesday after investors saw how the COVID-19 epidemic was preventing companies from restoring production to full-capacity after the Chinese Lunar New Year holidays, as the viral outbreak keeps workers at home and unable to head into factories.

What are Treasurys doing?

The 10-year Treasury note yield TMUBMUSD10Y, -2.52%   slumped 4.4 basis points to 1.544%, while the 2-year note rate TMUBMUSD02Y, -1.71%   was down 2.5 basis points to 1.399%. The 30-year bond yield TMUBMUSD30Y, -2.21%   slipped 5.1 basis points to 1.992%.

What’s driving Treasurys?

U.S. investors received one of the first indications of how the coronavirus could upend global supply chains, after Apple Inc. said it would not be able to meet second-quarter guidance due to the outbreak. In a statement, the iPhone maker said it could take longer than expected for production to return to normal conditions.

Provincial and local government officials across China have ordered factories to remain closed even though many workplaces were supposed to reopen on Feb. 10, at the end of the Lunar New Year holiday.

U.S. equity futures tumbled on Tuesday, while losses were spread across Asian and European markets.

See: Apple’s coronavirus warning wasn’t a total surprise, but magnitude rattles Wall Street

Read: Asia stocks fall as economic impact of coronavirus weighs on markets

In U.S. economic data, the Federal Reserve’s Empire State manufacturing survey for February will be published at 8:30 a.m. ET, while this month’s NAHB housing market index is later due at 10 a.m.

Later, the U.S. Treasury International Capital Report will give a glimpse of the investment activity of foreign investors, a significant buyer base of the U.S. government bond market.

What did market participants’ say?

“What markets may be more afraid of is that this is just the tip of the iceberg, both in other companies now set to flood out with profit warnings, and perhaps that the impact of the virus itself may be harder and longer lasting than first feared,” wrote rates analyst at NatWest Markets.

Sunny Oh is a MarketWatch fixed-income reporter based in New York.

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