Bonds

Treasury yields fall amid record surge in virus cases and stimulus stalemate

U.S. Treasury yields fell on Monday as hopes waned that a stimulus deal in Washington would be signed before the presidential election next week.

The yield on the benchmark 10-year Treasury note slipped 4 basis points to 0.795%, while the yield on the 30-year Treasury bond slumped 5 basis points to 1.593%. Yields move inversely to prices.

Treasurys

Yields retreated on Monday as CNN reported Sunday that House Speaker Nancy Pelosi said she had sent over a list of remaining concerns on the stimulus deal to the White House and hoped to hear back Monday.

She also suggested that the language around major issues such as coronavirus testing, jobless benefits, as well as state and local funding, still needed to be agreed with the White House.

The U.S. also saw a record number of coronavirus cases over the weekend, with recorded infections rising to more than 83,000 on both Friday and Saturday, surpassing the previous daily peak of around 77,300 cases in July.

Monday's decline in yields comes after the 10-year Treasury yield reached a four-month high of 0.84% last week.

"The market remains in a definitively higher yield environment than existed through most of the last four months," Ian Lyngen, BMO's head of U.S. rates, said in a note on Monday. "A backdrop that will be tested this week as decision day 2020 approaches and investors are offered the first glimpse at the third-quarter real GDP figures."

BlackRock on Monday downgraded U.S. Treasuries and upgraded their inflation-linked peers ahead of the election on a growing likelihood of significant fiscal expansion, which could trigger a rise in price pressures.

"Markets are increasingly reflecting a unified Democratic government outcome that may lead to a significant fiscal expansion," Mike Pyle, BlackRock's global chief investment strategist said in a note. "This electoral outcome would bring forward the market pricing of the higher inflation regime that we were already reflecting in our strategic asset views."