U.S. Treasury yields early Tuesday added to a push higher, a day after yields jumped to kick off the new year, sending the rate on the 2-year note to a 22-month high.
What are yields doing?
-
The yield on the 10-year Treasury note
TMUBMUSD10Y,
1.667%
was at 1.66%, compared with 1.628% at 3 p.m. Eastern on Monday. Yields and debt prices move opposite each other. -
The 2-year Treasury note
TMUBMUSD02Y,
0.789%
yielded 0.794%, up from 0.784% Monday afternoon. -
The yield on the 30-year Treasury bond
TMUBMUSD30Y,
2.057%
was at 2.045% versus 2.016% late Monday. - The 2-year yield finished Monday at its highest since March 2, 2020, based on 3 p.m. levels, according to Dow Jones Market Data, while the 10-year was at its highest since Nov. 24 and the 30-year at its highest since Nov. 23.
What’s driving the market?
Treasury prices fell Monday, driving up yields, as equities rallied, with the Dow Jones Industrial Average
DJIA,
and the S&P 500
SPX,
ending at records. Stock-index futures pointed to further gains for stocks on Tuesday.
Investors appear to have waved off concerns over the omicron variant of the coronavirus that causes COVID-19. Infections have surged, with the U.S. registering 1,083,948 cases on Monday, according to data collected by Johns Hopkins University — more than double the previous record of 486,428 set four days ago.
Hospitalizations for confirmed or suspected COVID-19 cases hit a seven-day average of 97,855 on Monday, according to data from the U.S. Department of Health & Human Services cited by The Wall Street Journal. That’s up 41% over the past two weeks but below the pandemic peak of 137,510 seen on Jan. 10, 2021, and a smaller peak of 102,967 seen on Sept. 4, 2021, amid the surge in the delta variant of the coronavirus.
Investors continue to look for the Federal Reserve to begin lifting rates as early as this spring, with fed-funds futures on Monday showing traders had priced in a better than 50% chance of a rate move in March, when the central bank is due to have ended its monthly asset purchases.
Data on tap Tuesday include the Institute for Supply Management’s gauge of manufacturing due at 10 a.m. Eastern, as well as November data on job openings and leavings.
Minneapolis Fed President Neel Kashkari is scheduled to discuss the economic outlook at 11:30 a.m.
What are analysts saying?
“Despite record national infection levels, yields finally continued their natural path higher. Is the ‘bad’ news discounted? The European example shows that the economic impact of omicron so far remains less worse than initially feared,” wrote analysts at KBC Bank in Brussels, in a Tuesday note.
“The monetary policy context continues to play a role as well. The Fed’s December decision to accelerate the taper process could already result in a March rate hike with some governors even calling to shrink the balance sheet starting in summer,” with this week’s economic data potentially strengthening those calls, they wrote. Jobs data due this week will indicate the tightness of the labor market, while the release of minutes from the Fed’s December meeting on Wednesday will offer more insight on the decision-making process, they said.
