Bond Report: 10-year Treasury yield ducks below 1.50% after ECB pledges to step up asset purchases

United States

U.S. Treasury yields slid in early Thursday trade as the European Central Bank indicated its willingness to support the economy by speeding up its asset-purchasing program.

What are Treasurys doing?

The 10-year Treasury note yield TMUBMUSD10Y, 1.497% fell 3.5 basis points to 1.485%, while the 2-year note TMUBMUSD02Y, 0.148% was down 1.2 basis points to 0.145%. The 30-year bond yield TMUBMUSD30Y, 2.249% edged 0.6 basis point lower to 2.236%.

What’s driving Treasurys?

The ECB said it will buy bonds as necessary to prevent financial conditions from tightening and jeopardizing the eurozone’s recovery during the pandemic. Perhaps more importantly, the ECB said it would step up the pace of purchases in the next quarter, a comment that analysts underlines the dovish tone of the ECB policy update.

Investors will now turn their attention toward the ECB President Christine Lagarde who will speak at a news conference at 8:30 a.m. ET.

The 10-year German government bond yield TMBMKDE-10Y, -0.351% slid 4.3 basis points to negative 0.354%.

In U.S. economic data, weekly initial jobless claims are expected to be slightly lower at around 725,000 when the data is published at 8.30 a.m. ET. Meanwhile, the Labor Department’s job openings and labor turnover survey is forecast to show vacancies rising to 6.7 million in February, from the previous month’s 6.6 million.

Also closely eyed by traders, the U.S. Treasury Department will auction off $ 24 billion of 30-year bonds on Thursday afternoon. Though investors did not suffer much indigestion from the previous two debt auctions earlier this week, the concern is inflation fears could sap the attractiveness of the longer-dated bond, considered the maturity in the Treasury market most vulnerable to expectations around price pressures.

What did market participants say?

“The just-released statement suggests that the ECB is trying to demonstrate its willingness to put a cap on bond yields without showing signs of panic,” said Carsten Brzeski, head of global macro for ING.