Bonds

Treasury yields turn higher after Fed announces corporate bonds buying

U.S. Treasury yields turned higher on Monday after the Federal Reserve said it will begin buying individual corporate bonds.

The yield on the benchmark 10-year Treasury note gained about 1 basis point to 0.708% after trading around  0.667% earlier. The 30-year bond rate also gained slightly to 1.456%. Yields move inversely to prices.

Yields climbed after the central bank announced it will include the purchase of individual corporate bonds as part of a continuing effort to support market functioning and ease credit conditions.

The Fed is broadening its corporate bond buying approach to include single issues on top of exchange-traded funds. The Fed previously had indicated that it eventually would buy bonds on the primary market, but Monday's announcement marked an expansion of that into the secondary market. The program has the ability to buy up to $750 billion worth of corporate credit.

Treasurys

Before the Fed news, bond yields were lower as investors grew more fearful of a resurgence of the coronavirus cases amid the reopening economy.

A number of states including Alabama, California, Florida and North Carolina have experienced a rise in Covid-19 cases since they began to reopen their economies. Texas and North Carolina reported record numbers of coronavirus-related hospitalizations on Saturday.

China, the original epicenter of the pandemic, is also subject to concern about a second wave, after Reuters reported that a district of Beijing is in a "wartime emergency" due to the discovery of a new cluster of infections centered around a wholesale market.

President Donald Trump is planning to push ahead with an indoor campaign rally in Tulsa, Oklahoma on Saturday despite local concern over an uptick in cases.

Risk assets worldwide are starting the week on the backfoot after a significant pullback last week, fueled by rising fears over a second wave and profit-taking following a recent surge in stock prices.

"The global economy continues to reopen, but in a very uneven way and with signs of a spike in cases around the globe (China in particular) and the US," Gregory Faranello, head of U.S. rates trading at AmeriVet Securities, said in a note. "Even from the highest levels, there has been cautious optimism but very few definitive answers as we move forward."

"In the end, a spike in cases along with increased testing should not be a surprise," Faranello added. 

Data out Monday showed manufacturing activity rebounded sharply in the New York area this month. The Empire State Manufacturing Survey posted a reading of -0.2 in June after hitting record lows in the previous two months. Economists surveyed by Dow Jones had expected a reading of -35.