10-year yield jumps to highest since April 15 as Treasury announces plan for 20-year bond

Treasury yields climbed higher on Wednesday after the Treasury Department announced a new 20-year note to help fund a record level of borrowing amid the coronavirus pandemic.


The yield on the benchmark 10-year Treasury note popped 5 basis points to a session high of 0.72%, the highest level since April 15. The yield on the 30-year Treasury bond jumped 9 basis points to 1.41%. Yields move inversely to prices.

The Treasury Department said it's introducing a 20-year bond coupon for the first time since the 1980s in an effort to push the record-setting debt levels further out in terms of duration. The department said it expects the initial offering size of the 20-year bond to be $20 billion and the auction will take place on May 20.

Treasury also said it will boost long-term refunding debt sales next week to a record $96 billion.

"Treasurys struggle a bit mostly due to the implicit statement that there will be plenty of supply going forward," said Dave Lutz of JonesTrading.

The size of the 20-year bond issuance came in bigger than what many market pros were expecting.

"For the 20 year, the range people were expecting was $13 to $15 billion and it came in at 20 billion," said John Briggs of NatWest. He said the 20-year would be especially attractive to insurers and pension funds who need duration in their portfolios.

"It's just a lot of long end issuance and they're ramping up quickly. They're leaning long. It's a steepening trade with the long end selling off, with heavier than expected long end supply," said Briggs.

Also on Wednesday, the latest private payrolls report from ADP and Moody's Analytics showed private payrolls were slashed by 20.2 million in April as the pandemic forced employers of all sizes to lay off people. The print is the worst in the survey's history going back to 2002.

Meanwhile, investors also monitored the reopening of state economies and smoldering tensions between Washington and Beijing over the coronavirus pandemic.

States across the U.S., including the coastal hubs of California and New York, signaled their intent to roll back lockdown measures for some sections of their economies. Meanwhile, President Donald Trump on Tuesday urged China for transparency about the origins of the virus which has now infected more than 3.6 million people worldwide, with more than 1.2 million cases confirmed in the U.S.

The White House has also urged the European Union to back an international inquiry into China's handling of the pandemic, which broke out in Wuhan at the end of last year. Former White House trade negotiator Clete Williams told CNBC that renewed tensions between the U.S. and China represent "the start of a new Cold War."

Several Federal Reserve policymakers on Tuesday indicated that the U.S. economy may begin a slow and uneven recovery in the second half of the year, after what is shaping up to become the worst recession in decades.

— CNBC's Patti Domm contributed reporting.