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Treasury yields fell early Monday as worries over the spread of the omicron variant and a major setback for President Joe Biden’s nearly $2 trillion spending package sparked worries about the outlook for global growth and sent equity markets lower.
What are yields doing?
-
The yield on the 10-year Treasury note
TMUBMUSD10Y,
1.384%
fell to 1.3979%, down from 1.401% at 3 p.m. Eastern on Friday. Yields and debt prices move opposite each other. -
The 2-year Treasury note
TMUBMUSD02Y,
0.609%
yielded 0.622%, compared with 0.64% on Friday afternoon. -
The 30-year Treasury bond
TMUBMUSD30Y,
1.821%
yielded 1.823%, up from 1.816% late Friday.
What’s driving the market?
Worries about the spread of the omicron variant of the coronavirus that causes COVID-19 rattled global markets Monday, sending equities lower as European countries reimposed or considered restrictions on activity and U.S. officials warned of a continued surge in cases.
In the U.S., President Joe Biden’s nearly $2 trillion Build Back Better plan appeared in serious jeopardy after Sen. Joe Manchin, D-W. Va., said on Sunday that he couldn’t support the package. A 50-50 split between Democrats and Republicans, with all Republicans opposed to the plan, makes Manchin’s vote crucial.
Economists at Goldman Sachs, citing Manchin’s opposition to the package, cut their U.S. growth forecast. Specifically, they said the expiration of the child tax credit and the lack of the other new spending that had been expected, led the cut their outlook for first-quarter growth to an annualized 2% from 3% for the first quarter of 2022, to 3% from 3.5% for the second, and to 2.75% from 3% in the third quarter.
What are analysts saying?
“Manchin’s objection is linked to the inflationary impact and uncertainties associated with projecting the actual costs. Needless to say, as a meaningful contribution to the market’s assumption of solid real growth in the year ahead, this represents a setback to be sure,” said Ian Lyngen, head of rates strategy at BMO Capital Markets, in a note.
“Let us not forget the building COVID case count and mounting concerns that additional restrictions to combat the omicron variant will further undermine economic performance in the coming months,” he wrote. “While it’s tempting to characterize these concerns as the usual suspects in the current environment, the reality is that the influence of pandemic and stimulus jitters becomes more relevant into year-end as liquidity wanes and conviction is scarce.”
