Virus Surge, Jobs Report Fuel Government-Bond Buying - The Wall Street Journal

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A masked pedestrian passes a closed framing shop in Grosse Pointe, Mich., in May 2020.... — A masked pedestrian passes a closed framing shop in Grosse Pointe, Mich., in May 2020. Concerns about coronavirus cases and jobless claims boosted interest in Treasurys on Thursday.
Photo: Paul Sancya/Associated Press

Updated June 25, 2020 5:17 pm ET

Fears about a second wave of coronavirus cases prompted investors to seek safety in Treasurys and to sell bonds of companies in industries most impacted by economic shutdowns.

A rise in Covid-19 cases across the country coincided with a report Thursday morning of 1.5 million weekly jobless claims by the Labor Department, roughly unchanged from the two previous weeks. U.S. stock markets fell after the report.

“The weekly claim numbers were a little higher than expected and that’s a concern,” said Larry Milstein, senior managing director of rates trading at R.W. Pressprich & Co. “A lot of this is about uncertainty as to how quickly people can get back to work.”

The flight to safety drove the yield of 10-year Treasurys down to around 0.674% from a close of 0.683% Wednesday, according to data from Tradeweb. European government bonds also rallied with the yield of the U.K. 5-year hitting a record low of negative .064%, according to Tradeweb.

Corporate bonds, which rose through most of May and June, weakened as investors reduced exposure to companies that would be most affected by a new wave of economic closings in the U.S.

The price of American Airlines Group Inc.’s newly issued 11.75% bond due 2025 has dropped about 3% this week to trade around 96 cents on the dollar Thursday before rebounding to 97.25, according to data from MarketAxess. Casino company Golden Nugget LLC’s bond due in 2024 fell about 6% to 76 cents on the dollar.

Falling corporate-bond prices increase the yield that companies must pay to borrow new debt, endangering a key source of capital for businesses struggling to save cash amid a plunge in sales. Sales of new high-yield bonds, which are rated below investment grade, hit an unusually high $20 billion last week, according to data from Dealogic, but the recent selloff could slow that pace significantly.