Yields on US Treasuries are soaring

Yields, which rise when bond prices fall, have risen steadily overnight despite the lack of a clear catalyst, leading analysts to look for explanations.

In comments to customers, some said President Biden’s prime-time speech on Thursday night would have made investors more optimistic about the economic outlook. In the speech, Mr. Biden ordered states to make all American adults eligible for a vaccine by May 1, saying families and friends could likely gather in small groups to celebrate Independence Day.

Some analysts also attributed the move at least in part to “ delivery disruptions ” after the U.S. Treasury sold $ 120 billion in three-year bonds, ten-year bonds, and 30-year bonds in the past three days. While the demand for those auctions has been fairly high, large auctions can sometimes trigger aftershocks if investors are happy with what they just bought on the sale and are hesitant to buy more.

Interest rates began to rise sharply a month ago after the same series of auctions, raising concerns that a flood of new debt could add to the pressure on the market, triggered by expectations for a strong economic recovery and possible interest rate hikes from the Federal Reserve. Some traders say the market could be more vulnerable on Fridays too, with investors nervous about buying Treasurys before the weekend.

As yields rose on Friday, traders looked to see if the 10-year yield would rise above 1.626%, the recent intraday record a week earlier. It crossed that level by mid-morning, sparking a short wave of more sales.

Investors pay close attention to long-term yields on US Treasuries, as they play a large role in determining the cost of financing across the economy. Many investors also use 10-year Treasury yield as a discount rate in formulas to value stocks – making rising yields a particular threat to technology companies that are expected to make a greater share of their profits in the future.

Investors are also measuring whether the weakness in Treasurys will transfer to the corporate bond market. While yields on investment-grade corporate bonds tend to rise along with those on government bonds, many consider it a bigger problem if the gap between the two widens, adding to the cost of funding.

As it stands, borrowing costs remain very low for most companies, although the average extra return that investors are asking to hold corporate bonds over Treasurys has increased in recent weeks.

The attractive loan market was highlighted at Verizon Communications on Thursday Inc.

sold $ 25 billion in bonds, pegged to sixth-largest corporate bond sales ever, to help fund its recent spectrum purchases.

According to Dealogic, non-financial companies issued $ 81 billion in investment-grade bonds from March 1 through Thursday, up from $ 38 billion in the previous two-week period.

Write to Sam Goldfarb at [email protected]