Hopes of a quick economic recovery from the coronavirus pandemic have been dampened by a surge in new cases across a number of states. California and Florida reported record daily spikes on Wednesday, while Houston said its intensive care unit is almost at capacity as the spread intensifies in Texas.
New York, New Jersey and Connecticut have ordered visitors from hotspot states to quarantine for 14 days on arrival.
More than 2.38 million coronavirus cases have been reported in the U.S. with at least 121,979 deaths, according to data compiled by Johns Hopkins University.
Yields remained lower after data showed an additional 1.48 million Americans filed for unemployment benefits last week. Economists polled by Dow Jones expected a print of 1.35 million. This marks the second straight week that U.S. jobless claims data were worse than expected.
Still, the total of those receiving benefits continued to fall as continuing claims fell by 767,000 to 19.52 million.
"So after 9 weeks of sharp slowdowns in the pace of increase in those filing initial claims, the rate over the past two weeks has slowed and of course is still very elevated," Peter Boockvar, chief investment officer at Bleakley Advisory Group, said in a note.
Investors are also reacting to International Monetary Fund's downgrade of its global economic forecasts and a warning about soaring debt levels. The IMF on Wednesday forecast a contraction of 4.9% in global gross domestic product (GDP) in 2020, lower than the 3% fall it predicted in April. A growth rate of 5.4% is now expected in 2021, down from a forecast of 5.8% in April.
Auctions will be held Thursday for $50 billion of 4-week Treasury bills and $50 billion of 8-week bills, along with $41 billion of 7-year notes.