Bonds

Treasury yields decline for a second day on rising concerns about the economy

Treasury yields retreated for a second day on Tuesday as a continued surge of coronavirus cases stateside tempered hopes of a smooth economic recovery.

The yield on the benchmark 10-year Treasury note fell 2 basis points to 0.611% and the yield on the 30-year Treasury bond also dropped 4 basis points to 1.292%. Yields move inversely to prices.

Treasurys

Yields didn't rise even after data showed inflation was slightly higher than expected. The U.S. consumer price index rose 0.6% in June, compared to the expectations of an increase of 0.5%, according to Dow Jones. The Labor Department said rising gas prices accounted for more than half of last month's increase.

"Our advice is don't be fooled by today's jump in CPI prices as the longer downturn in the economy from the coronavirus second wave all but guarantees that inflation isn't going anywhere," Chris Rupkey, chief financial economist at MUFG Union Bank, said in a note.

California Governor Gavin Newsom on Monday reimposed restrictions on businesses and schools as new coronavirus cases and hospitalizations continue to surge in the nation's most populous state. Bars, restaurants, museums, zoos and movie theaters have all been forced to cease indoor operations.

Texas saw current hospitalizations fall by five on Monday, breaking 14 consecutive days of record highs, the state health department confirmed Monday.

Investors also digested positive news on the vaccine front on Monday. Two experimental coronavirus vaccines jointly developed by German biotech company BioNTech and U.S. pharmaceutical giant Pfizer received "fast track" designation from the U.S. Food and Drug Administration.

Reuters reported Monday that a senior U.S. official had said drugmakers working with the U.S. government were on track to begin actively manufacturing vaccines by the end of summer.

Meanwhile, Senate Majority Leader Mitch McConnell confirmed in a Kentucky radio interview that negotiations will begin next week on a fifth coronavirus response bill, with Democrats and Republicans split on the extent of aid required.

Auctions will be held Tuesday for $34 billion of 52-week Treasury bills, $35 billion of 119-day bills and $35 billion of 42-day bills.