By Matt Wirz
U.S. government bonds opened to relative calm Wednesday, then rallied as a decline in stock futures augured another whipsaw day in equities over fears about economic damage from the spread of the coronavirus.
The 10-year U.S. Treasury yield dropped to around 0.704% Wednesday morning from 0.743% Tuesday, according to data from Tradeweb, as investors resumed buying the debt as a safety play. The benchmark instrument had sold off sharply late Tuesday when stocks surged and its yield jumped to about 0.8% from 0.585%. Bond yields fall when prices rise.
Still, there are signs of decoupling between stocks and bonds. The yield of the 10-year is now higher than that of the 7-year note, reversing an unusual inversion that occurred Monday at the height of market panic this week, FHN Financial Strategist Jim Vogel said in a research note Wednesday. The 7-year yielded about 0.678% Wednesday, according to Tradeweb.
"Both rates and credit are getting better accustomed to sudden and overly sensitive swings among equities," he said. "Greater independence between fixed income and equities can give traders time to look more closely at individual markets rather than constantly reacting to a flash move elsewhere."
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