Bonds

10-year Treasury yield drops to 0.65% on fears of a second coronavirus wave

Treasury yields dropped on Thursday as rising fears of a second wave of the virus and a huge sell-off in stocks drove investors to safe-haven bonds.

Treasurys

The yield on the benchmark 10-year Treasury note plunged 8 basis points to 0.65%, hitting the lowest level since June 3. The yield on the 30-year bond fell 10 basis points to 1.40%. Yields move inversely to prices.

The drop in yields came as the stock market suffered the biggest one-day decline since March with the S&P 500 down more than 5% Thursday.

The coronavirus pandemic remains on investors' radar, with confirmed infections in the U.S. now exceeding 2 million and several areas of the country reporting spikes following the reopening of their economies.

Texas has reported three consecutive days of record-breaking Covid-19 hospitalizations.  Meanwhile, nine California counties are reporting a spike in new coronavirus cases or hospitalizations of confirmed cases.

The U.S. Food and Drug Administration (FDA) said Wednesday that it is seeking fast reviews of various Covid-19 treatments and tests for emergency clearance.

On the data front, Labor Department reported Thursday that the pace of unemployment claims declined again last week to 1.54 million from 1.87 million the week prior. Economists surveyed by Dow Jones were expecting a total of 1.6 million new claims during the week ending June 6.

On Wednesday, the Fed offered a dour forecast for the economy in the wake of the coronavirus crisis. The central bank projected an economic contraction of 6.5% in 2020, after months of stymied business activity due to coronavirus-induced lockdowns, with the unemployment rate expected to be 9.3% by year-end.

However, the central bank sees GDP (gross domestic product) growth rebounding 5% in 2021 and a further 3.5% in 2022, and vowed to support the U.S. economy on the "long road" to recovery.

The Fed's policymakers also voted unanimously to hold the federal funds target rate at 0%-0.25% range and the central bank projected no hikes through 2022.

Auctions will be held Thursday for $70 billion of 4-week Treasury bills, $60 billion of 8-week bills and $19 billion of 30-year bonds.