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U.S. Treasury yields rose across the board Tuesday, as investors sold off government debt and bought equities again, on optimism that vaccines may be more effective than previously thought in fighting the new omicron variant of coronavirus.
What are yields doing?
-
The 10-year Treasury note
TMUBMUSD10Y,
1.481%
yields 1.471%, up from 1.418% at 3 p.m. Eastern Time on Monday. -
The rate for the 30-year Treasury
TMUBMUSD30Y,
1.910% ,
known as the long bond, was at 1.904%, advancing from 1.847% a day ago. -
The 2-year Treasury note yield
TMUBMUSD02Y,
0.666%
was at 0.658%, compared with 0.628% on Monday.
What’s driving the market?
Early data now suggest that the COVID-19 vaccines developed by Pfizer PFE and German partner BioNTech BNTX and Moderna Inc. MRNA, bolstered by a booster shot, are effective against infection with the new omicron variant. Moderna said data showed that a 50-microgram booster dose of its COVID vaccine triggered a 37-fold rise in neutralizing antibodies against the omicron variant.
Read: Data suggest boosters are essential to avoid omicron infection
President Joe Biden, who is struggling to get support for the Democrats’ nearly $2 trillion Build Back Better bill in the U.S. Senate, is scheduled to deliver a speech on COVID later Tuesday.
Also later in the day, investors will be watching for a sale of 20-year Treasurys BX:TMUBMUSD20Y at 1 p.m. ET., which could influence trading.
Lighter-than-usual trading volumes, with the Treasury market closing an hour early on Thursday and remaining closed on Friday in observance of the Christmas holiday, are likely to be a feature of the trading action as investors assess the balance of risks in trading the final two weeks of 2021.
Until Tuesday, yields had been mostly pressured lower due to uncertainty about the economic implications of a lengthier battle with the pandemic and the impact on inflation, which has been surging. The Federal Reserve has signaled that it intends to raise interest rates in 2022 to slow rising inflation, but analysts are concerned that the central bank may be making an error in its policy, which could lead to a recession. Buying of Treasurys, keeping yields anchored, has been at least partly underpinned by this fear.
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What are strategists saying?
“It’s the shortest day of the year in terms of daylight in the Northern Hemisphere and while we’re not anticipating this fact will define the trading session, we’ll offer a nod to the fact Monday was the first time the phrase ‘holiday trading conditions’ really felt appropriate,” wrote BMO Capital Markets rates strategists Ian Lyngen and Ben Jeffery. “Volumes were suppressed and the in-range price action took on a decidedly choppy character as investors continue to grapple with the renewed uncertainties associated with the omicron variant, holiday shopping season, and the efforts of the Biden administration to push through its spending plan,” they wrote.
