Treasuries Pull Back Off Best Levels But Close Slightly Higher

After failing to sustain an early move to the upside, treasuries showed a lack of direction over the course of the trading day on Thursday.

Bond prices spent the afternoon bouncing back and forth across the unchanged line before closing slightly lower. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, edged down by 1.1 basis points to 1.299 percent.

The ten-year yield closed lower for the sixth consecutive session, ending the day at another new record closing low.

The early strength among treasuries came as ongoing worries about the rapid spread of the coronavirus outbreak continued to boost the appeal of safe havens like bonds.

Adding to the concerns, the CDC confirmed a coronavirus infection in an American who reportedly did not have relevant travel history or exposure to another known patient with the disease.

The CDC said the patient’s exposure is currently unknown and could be the first instance of community spread of the virus in the U.S.

Microsoft (MSFT) also warned that it does not expect to meet its revenue guidance for a key segment that includes Windows due to the outbreak.

The software giant joins a growing list of big-name companies that have warned about the potential impact of the coronavirus.

In a note to clients, Goldman Sachs predicted U.S. companies will generate zero earnings growth in 2020 as a result of the outbreak.

President Donald Trump sought to downplay concerns about the coronavirus in a press conference on Wednesday, although critics have accused the president of failing to grasp the severity of the outbreak.

Meanwhile, traders largely shrugged off a slew of U.S. economic data, including reports showing a bigger than expected rebound in pending home sales and a much smaller than expected drop in durable goods orders.

The Treasury Department also revealed that this month’s auction of $32 billion worth of seven-year notes attracted above average demand.

The seven-year note auction drew a high yield of 1.247 percent and a bid-to-cover ratio of 2.49, while the ten previous seven-year note auctions had an average bid-to-cover ratio of 2.39.

The bid-to-cover ratio is a measure of demand that indicates the amount of bids for each dollar worth of securities being sold.

News on the coronavirus front is likely to remain in focus on Friday, overshadowing reports on personal income and spending, consumer sentiment and Chicago-area business activity.

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