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Bond Report: Most Treasury yields remain higher after Pfizer/BioNTech omicron report

Most yields for U.S. government debt remained higher on Wednesday as investors digested news suggesting the omicron variant of coronavirus that causes COVID-19 may not impact the economy as much as feared.

The only exceptions were the 2-year rate, which was marginally lower in New York afternoon trading and 5-year yield, which was little changed.

What are yielding doing?

The 10-year Treasury note
TMUBMUSD10Y,
1.505%

yields 1.509%, up from 1.479% at 3 p.m. Tuesday.

The 30-year Treasury
TMUBMUSD30Y,
1.871%
,
aka the long bond, was yielding 1.874%, compared with 1.795% on Tuesday.

The 2-year Treasury note rate
TMUBMUSD02Y,
0.671%

was down at 0.676%, versus 0.687% in the prior session.

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.

Most Treasury yields moved higher on Wednesday after a report from Pfizer Inc.
PFE,
-0.40%

and BioNTech SE
BNTX,
-2.41%

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 to lower banks’ reserve requirement ratio, which set the stage for easier monetary policy 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 data, U.S. job openings rose to 11 million in October, versus the 10.6 million forecast of economists polled by Dow Jones, and the job-quitting rate slipped to 2.8% from 3% the prior month.

Meanwhile, a $36 billion auction of 10-year Treasury notes produced “unremarkable stats,” according to Jefferies economists Thomas Simons and Aneta Markowska.

What analysts 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,” the CIO wrote.

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