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U.S. Treasurys stabilized early Tuesday, with the 10-year yield hovering near unchanged after falling to its lowest level since February on Monday as fears about the spread of the delta variant of the coronavirus that causes COVID-19 sparked a flight to safe assets like government bonds.
What are yields doing?
-
The yield on the 10-year Treasury note
TMUBMUSD10Y,
1.145%
was down 0.1 basis point at 1.186%. Yields and debt -
The 2-year note yield
TMUBMUSD02Y,
0.197%
was off 0.4 basis point at 0.202%. -
The 30-year Treasury bond yield
TMUBMUSD30Y,
1.788%
rose 2.2 basis points to 1.831%.
What’s driving the market?
Treasury yields dropped sharply Monday as investors sought safety in assets like government paper as stocks and other assets viewed as risky tumbled, with the Dow Jones Industrial Average
DJIA,
suffering its biggest one-day loss since October, on growing fears over the spread of the delta variant.
The World Health Organization said cases and deaths are climbing globally after a period of decline, spurred by the highly contagious delta variant.
Analysts said the virus worries added to fears about the outlook for economic growth that had been brewing in the bond market in recent months as low vaccination rates in many countries in Asia in particular prolong the pandemic.
However, investors may be warming up again to assets perceived as risky on Tuesday, with global equities finding their footing and U.S. stock-index futures pointing to a bounce.
What are analysts saying?
One question for investors is whether the rally in Treasurys is driven largely by technicals or does represent a “safe-haven bid” related to the delta variant, said W. Brad Bechtel, global head of FX strategy at Jefferies, in a note.
So far, authorities have appeared to largely resist reimposing large-scale lockdown restrictions, “but the market is still unsure if that will definitely be the case, or if we’ll be locking down in the fall again,” he said. “So I am not sure how much of this bond market is safe-haven vs. technical at the moment, perhaps a little of each.”
