By Vivien Lou Chen and William Watts
Long-dated U.S. Treasury yields rebounded Tuesday on signs of a shift in investor sentiment, following Monday’s broad-based flight-to-safety on fears about the spread of the delta variant of the coronavirus that causes COVID-19.
What are yields doing?
The yield on the 10-year Treasury note /zigman2/quotes/211347051/realtime BX:TMUBMUSD10Y +1.39% rose 2.7 basis points to 1.208%.
The 2-year note yield /zigman2/quotes/211347045/realtime BX:TMUBMUSD02Y +1.79% slipped 1.6 basis points to 0.194%.
The 30-year Treasury bond yield /zigman2/quotes/211347052/realtime BX:TMUBMUSD30Y +1.86% climbed 5.3 basis points to 1.869%.
What’s driving the market?
The 10-year yield climbed, after having dropped earlier in the day to another five-month low. Meanwhile, rates on government debt maturing in two to five years dropped. Together, those moves suggest that investors are eying a later start to the Federal Reserve’s tightening process and reassessing their long-term economic outlooks.
Stocks also rose on Tuesday, with the Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +0.0077% higher by 1.8% — a day after the index had suffered 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 nearer-term 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.
What are analysts saying?
“The market’s expectations for an accelerated tightening cycle have been pushed back, as reflected in bond yields,” said Edward Moya, senior market analyst for the Americas at Oanda Corp. “Global growth concerns were somewhat overdone and a delayed global economic reopening is not necessarily a major roadblock. Risky assets will still remain attractive, given how low global bond yields are.” Meanwhile, Washington-based firm Monetary Policy Analytics said the continued spread of the delta variant — along with recent developments in markets — should support those on the Federal Open Market Committee, like Fed Chairman Jerome Powell, “who are practicing patience.” The note was titled, “Disappointment Likely for Those Itching to Taper.”