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U.S. Treasury yields showed a lack of direction on Monday as investors eyed progress toward distribution of a vaccine against COVID-19.
What are Treasurys doing?
The 10-year Treasury note yield TMUBMUSD10Y, 0.844% rose 0.4 basis point to 0.845%, trimming its monthly drop to 1.3 basis points, while the 2-year note rate TMUBMUSD02Y, 0.144% was virtually flat at 0.147%, and down 0.5 basis point for the month. The 30-year bond yield TMUBMUSD30Y, 1.569% was steady at 1.574%, after a 6.3 basis point rise in November.
What’s driving Treasurys?
Moderna said it would ask regulators to grant emergency use authorization for its COVID-19 vaccine candidate, with results showing that it displayed a 94% efficacy. The U.S. will receive access to Moderna’s vaccine first.
The positive vaccine news, however, was offset by the more immediate realities of a pandemic that is only expected to intensify after the Thanksgiving Day holiday last week.
The U.S. counted 136,313 new cases on Sunday, and at least 818 people died, according to a New York Times tracker. In the last week, the U.S. has averaged 162,007 cases a day, up 8% from the average two weeks ago.
With the end of the month in sight, portfolio managers were also snapping up bonds to extend the overall maturities of their holdings to stay in line with their competing benchmarks. As debt matures, a bond portfolio’s average maturity is falling over time and therefore needs to be topped up at the end of every month.
In addition, traders said there was some rebalancing from stocks into bonds on Tuesday.
In economic data, November Chicago PMI came in at a reading of 58.2. Pending home sales in October fell 1.1%.
What did market participants say?
“Month-end duration needs and asset rotation flows provided a backdrop of activity, even if the absence of top-tier data limited any urgency for more dramatic price action,” said Ian Lyngen, head of U.S. rates strategy at BMO Capital Markets.
