10-year Treasury yield dips below 0.55% for first time in over 3 months after record GDP contraction

Treasury yields moved lower on Thursday as data showed U.S. economy shrank at a record pace in the second quarter.


The yield on the benchmark 10-year Treasury note fell 3 basis points to around 0.54%, marking the first time the benchmark rate has traded below the 0.55% threshold in more than three months. The yield on the 30-year Treasury bond was also down 5 basis points at 1.19%. Yields move inversely to prices.

Data on Thursday showed gross domestic product plunged by a record 32.9% in the second quarter. The number was not as bad as feared, however, as economists surveyed by Dow Jones had expected a 34.7% decline.

Meanwhile, U.S. weekly jobless claims came in at 1.434 million, roughly in line with estimates. However, continuing claims, or those who have been collecting for at least two weeks, totaled 17.018 million, up from about 16 million last week.

"It's been long known that Q2 growth was abysmal, a fact confirmed this morning without spurring equally compelling price action," Jon Hill, BMO's U.S. rates strategist, said in a note. "The resulting net price action was an intuitive bull-flattening of the Treasury yield curve."

On Wednesday, the Federal Reserve voted to keep its benchmark overnight lending rate anchored near zero, where it has been since March 15.

The Federal Opening Market Committee also underlined its commitment to maintaining its bond purchases and the array of lending and liquidity programs associated with the response to the coronavirus outbreak.

"The message from the Fed will be strong -- that they are all in -- with it clear that they are getting more concerned about Covid's effects and economic growth in the second half," said Gregory Faranello, head of U.S. rates at AmeriVet Securities. "Long-end Treasury rates are hugging the bottom of their range and seem to want to go lower. That reflects also that there's a ton of about the virus and geopolitics."

The U.S. Treasury will auction $35 billion in eight-week bills and $30 billion in four-week bills on Thursday.

— CNBC's Jeff Cox contributed to this report.