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Yields for U.S. government debt on Wednesday were trading mixed as investors digested news suggesting the omicron variant of coronavirus that causes COVID-19 may not impact the economy as much as feared.
What are yielding doing?
-
The 10-year Treasury note
TMUBMUSD10Y,
1.475%
yields 1.475%, down slightly from 1.479% at 3 p.m. Tuesday. -
The 30-year Treasury
TMUBMUSD30Y,
1.804% ,
aka the long bond, was yielding 1.800%, inching up from 1.795% on Tuesday. -
The 2-year Treasury note rate
TMUBMUSD02Y,
0.703%
was at 0.696%, edging up compared with 0.687%.
What’s driving the market?
Reports on vaccines and treatments against the omicron strain of coronavirus are dictating market moves in stocks and bonds this week.
Yields for Treasurys pared early declines Wednesday after report a from Pfizer Inc.
PFE,
and BioNTech SE
BNTX,
said results from an “initial laboratory study” showed that their COVID-19 vaccine neutralized the omicron variant of the coronavirus after three doses, or the full two-dose regimen plus a booster shot.
Overall, global markets turned optimistic this week about the impact of the omicron variant and a move by China’s central bank lowering key interest rates to boost its slowing economy.
However, the Federal Reserve’s plan to tighten monetary policy by reducing its bond purchases has served to curb investor enthusiasm. The Fed meets next week on Dec. 14-15.
In Wednesday’s dealings, Treasury traders are looking for a report on the job openings due at 10 a.m. Eastern Time, with economists polled by Dow Jones forecasting 10.6 million opening in October, up from 10.4 million in September.
Meanwhile, investors will watch for a $36 billion auction of 10-year Treasury notes at 1 p.m.
What strategists are saying
“Great news from Pfizer that a booster will work in adding solid protection against Omicron and stocks are celebrating but I want to emphasize that what the Fed does from here should be the market’s predominant focus,” wrote Peter Boockvar, chief investment officer at Bleakley Advisory Group, in a Wednesday note.
“At least with QE, the Fed is ending a $1.44 Trillion annualized asset purchase program possibly within the next 3 months. That is a lot of liquidity flow that is going to zero, quickly. With the possibility of rate hikes thereafter, the 2 yr note yield is now up 11 bps this week and 20 bps over the past 3 weeks. This said, I do like all the travel and leisure stocks,” the CIO wrote.
