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U.S. Treasury yields edged up Tuesday, led by the 2-year maturity, as equities rose and investors remained hopeful that the omicron variant of COVID would have limited economic impact.
An auction of 5-year U.S. Treasurys is set for later in the session and data on housing is slated for later-morning Tuesday.
What are yields doing?
-
The 10-year Treasury note yields
TMUBMUSD10Y,
1.461%
1.483%, little changed from 1.480% on Monday at 3 p.m. Eastern Time. -
The 2-year Treasury note yield
TMUBMUSD02Y,
0.750%
was at 0.750%, up from 0.707% a day ago. -
The 30-year Treasury bond rate
TMUBMUSD30Y,
1.865%
was at 1.886%, little changed from 1.885% on Monday.
What’s driving the market?
Yields on the shorter end of the Treasury curve were rising as investors shook off concerns about the economic impact of the omicron variant of the coronavirus.
While COVID spreads around the globe, particularly wreaking havoc on air travel due to rising cases among workers, investors believe the global economy can handle it. The Centers for Disease Control and Prevention has cut its recommended COVID-19 isolation time to five days, from 10, if affected individuals are symptom-free.
Debt investors are looking ahead to the S&P Case-Shiller U.S. house price index for October at 9 a.m. Eastern Time., and an auction of $59 billion in 5-year notes
TMUBMUSD05Y,
is due to be held at 1 p.m., which could further influence yields on shorter-dated debt.
Absent other major data, investors may also looking for some guidance on economic health from the Richmond Federal Reserve’s manufacturing index report at 10 a.m., a reading of economic conditions in the central bank’s district.
Fixed-income investors have been digesting a faster reduction in monthly bond purchases by the Federal Reserve to combat inflation and expectations that policy makers could lift interest rates, which currently stand at a range between 0% and 0.25%, at least three times in 2022.
What strategists are saying
“Although QE does lower rates, it is better to think about mass-scale QE as accelerating borrowing by those with the best credit. Those who intrinsically pay more to borrow then find easier financial conditions when the economy recovers and the best credits are out of the way,” wrote Jim Vogel, analyst at FHN Financial Markets, in a Tuesday note.
