U.S. government debt yields dropped to record lows on Friday as angst over the spread of Covid-19 and fears of a wide rollback in reopening efforts sent investors in search of safer securities like Treasurys.
The yields on the 3-year and 5-year Treasury notes sank to record lows of 0.17% and 0.29%, respectively. Bond yields rise as their prices drop.
U.S. yields, which had traded flat until around 10 a.m. ET, rolled over after Texas Gov. Greg Abbott said that the state will curb some of its reopening measures as coronavirus cases and hospitalizations continue to rise.
Florida announced it would suspend on-premises alcohol consumption at bars in the state in a similar effort to slow the spread of the disease. In Arizona, the number of cases jumped by 5.4%, topping a seven-day average of 2.9%.
"Case counts and closures will once again be the primary drivers of price action in the Treasury market as the weekend approaches," wrote Ian Lyngen, head of rates strategy at BMO Capital Markets.
"While the trade war and looming election carry with them a degree of event risk, the influence of Covid-19 on expectations for both the depth of the recession and the pace of the recovery remains the dominant factor in the macro narrative," Lyngen added.
Yields fell on Thursday amid concerns of a resurgence in Covid-19 infections in the United States with California, Texas and Florida seeing record numbers of new cases.
The surge in new cases has throughout the week dampened Wall Street's hopes of a quick economic recovery from the coronavirus pandemic. Investors shifted out of risky assets on Tuesday and Wednesday, when California and Florida reported record daily spikes.
Houston, meanwhile, said its intensive care unit is almost at capacity as the spread intensifies in Texas. New York, New Jersey and Connecticut now require visitors from states with high infection rates to quarantine for 14 days upon the arrival.
Yields also fell in the prior session after data showed an additional 1.48 million Americans filed for unemployment benefits during the week ended June 20. Economists polled by Dow Jones expected a print of 1.35 million. This marks the second week that U.S. jobless claims data were worse than expected and the 14th straight week of initial claims over 1 million.