Illustration: Rebecca Zisser

The stock market selloff has drawn the most attention this week, but moves in the U.S. government debt market will likely have much more important impacts on the economy.

The state of play: Mass bond buying has taken place since the beginning of the year and picked up steam as headlines about the spread of novel coronavirus have grown more worrisome.

Expand chart
Source: Federal Reserve Board; Chart: Axios Visuals

Why it matters: The yield on the 10-year U.S. Treasury note, which hit a new record low on Wednesday, is tied to the rates on mortgages, student loans and more. As it declines, credit gets cheaper and more attractive to both individuals and businesses.

  • Americans already have more debt than at any time in history and low rates are likely to fuel an even greater increase.
  • That could help buoy the economy through the current coronavirus scare, but also adds to outstanding risks.

What to watch: The interest rate for federal student loans are recalibrated once a year to take into account changes in the government's borrowing costs.

  • The auction that sets the rate will happen on May 12. If yields remain near their current levels, student loan interest rates will be set at all-time lows for the 2020-21 academic year, analysts at Credible Insights say.

By the numbers:

  • If the 10-year yield stays near its current level, undergrad rates would be 3.35%, down from 4.54% today.
  • Grad students (direct subsidized loans): 4.90%, down from 6.08% today.
  • Grad and parent PLUS loans: 5.90%, down from 7.08% today.

That would likely encourage more students to take on loans, adding to the inflated level of outstanding U.S. student debt, currently totaling $1.6 trillion.

Also important: Mortgage rates, already near record lows, are primed to drop further, adding to the wave that prompted the highest pace of new U.S. home sales since July 2007 last month.

  • Housing affordability has become a serious worry as prospective homeowners continue to report difficulty finding a home with a reasonable price tag.
  • Rising prices have pushed a growing number of Americans, especially on the West Coast, to live in vehicles, according to the Wall Street Journal.

Watch this space: Businesses, especially U.S. banks, have been taking advantage of low interest rates and easy money from the Fed for years, but that has masked a decline in net interest margins, S&P Global warned on Monday.

  • "[L]ower interest rates could lead to more risk-taking (perhaps adding to already high commercial leverage). Separately, we expect banks' capital ratios to decline somewhat as they continue to pay out significant chunks of their earnings to shareholders."

Go deeper: The end of the magic stock market

Go deeper

Unemployment rate falls to 13.3% in May

Data: Bureau of Labor Statistics; Chart: Axios Visuals

The U.S. unemployment rate fell to 13.3% in May, with 2.5 million jobs gained, the government said on Friday.

Why it matters: The far better-than-expected numbers show a surprising improvement in the job market, which has been devastated by the coronavirus pandemic.

U.S. banks hauled in $1.85T in new Q1 deposits

Reproduced from S&P Global; Table: Axios Visuals

U.S. banks had a fantastic first quarter in terms of new deposits, with the top 50 banks adding nearly $2 trillion of assets, more than 10 times the average quarterly increase for the entire banking sector.

What happened: The 50 largest U.S. banks added $1.853 trillion in assets during the first quarter, a report from S&P Global Market Intelligence shows.

U.S. savings rate skyrocketed in April

Data: U.S. Bureau of Economic Analysis; Chart: Axios Visuals

A major reason banks were rolling in so much dough last quarter is the explosive growth of the U.S. personal savings rate, which hit the highest mark since the 1980s in March and a historic 33% rate in April.

By the numbers: The rate of savings as a percentage of disposable income was by far the highest since the Bureau of Economic Analysis started tracking it in the 1960s.