Quantitative Easing

CASH – US Yields Rise As Omicron Concern Raises Risk Appetite

(Updates Fauci comments, adds auction results, updates prices)

NEW YORK, Dec. 7 (Reuters) – The benchmark 10-year US Treasury yield rose for the second day in a row on Tuesday, as concerns over the newly discovered Omicron COVID-19 variant continued to subside and increase in appetite for risk.

British drugmaker GSK said on Tuesday that its antibody-based COVID-19 therapy with its US partner Vir Biotechnology was effective against all mutations in the variant, citing new data from early-stage studies.

The announcement came after comments over the weekend from a health official in South Africa that Omicron cases in the country had shown only mild symptoms. U.S. infectious disease expert Dr Anthony Fauci said on Tuesday early evidence indicated that while the variant is likely more transmissible, it is also less severe.

The yield on 10-year Treasuries rose 4.8 basis points to 1.482%.

The 10-year yield saw its biggest weekly decline since June 2020 last week after comments from Federal Reserve Chairman Jerome Powell took on a more hawkish tone and concerns about the Omicron variant rocked consumers. markets. The central bank is due to hold its last policy meeting of the year next week.

“We had a knee-jerk reaction from the market last week to the Fed; really it takes a few days for the market to digest the idea that the tapering is going to end sooner and therefore the rate hikes are going to start sooner, ”said Seema Shah, chief strategist at Principal Global Investors in London.

“But as we start to see some of Omicron’s challenges hopefully lift, along with continued evidence that the economy is strong enough, then you should hopefully start to see some of that strength. come back into the market and that should see bond yields coming a bit from here.

US stocks were in rally mode, with the S&P 500 up around 2% and the Nasdaq up around 3%.

Economic data showed unit labor costs in the United States rose more than initially thought in the third quarter, accelerating at an annualized rate of 9.6% from the 8.3% initially reported. , indicating that high inflation could persist for some time. In addition, the US trade deficit has narrowed sharply, which could mean that trade will contribute to economic growth this quarter for the first time in more than a year.

The yield on 6-month bills climbed to 0.152%, its highest since July 16, 2020, as investors anticipate a Fed rate hike.

Later in the week, investors will be able to look at the November Consumer Price Index to gauge inflationary pressures.

The yield on the 30-year Treasury bill rose 4.4 basis points to 1.802%.

A $ 54 billion 3-year Treasury auction was widely viewed as decent by analysts. Demand for debt averaged 2.43 times the ratings on sale.

The auctions later in the week include $ 36 billion in 10-year bonds on Wednesday and $ 22 billion in 30-year bonds on Thursday.

A closely watched portion of the U.S. Treasury yield curve measuring the spread between two-year and ten-year Treasury bill yields, seen as an indicator of economic expectations, was at 79.1 basis points, after declining expanded to 81 Monday.

The two-year US Treasury yield, which typically moves with interest rate expectations, rose 5.4 basis points to 0.689%.

The 5-year US dollar inflation-linked forward swap, considered by some to be a better indicator of inflation expectations due to possible distortions caused by the Fed’s quantitative easing, was the latest at 2.415% . (Reporting by Chuck Mikolajczak; Editing by Dan Grebler)

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