Coronavirus

Treasury Yields Are Flat With the Fed's Faster Taper Plans, Omicron Variant in Focus

Source: NYSE

U.S. Treasury yields were steady on Wednesday, amid investor concerns around the omicron variant and the Federal Reserve's plans to potentially taper faster than expected.

The yield on the benchmark 10-year Treasury note fell just 1 basis point to 1.424% by around 4:20 p.m. ET. The yield on the 30-year Treasury bond dipped 2 basis points to 1.762%. Yields move inversely to prices and 1 basis point is equal to 0.01%. Yields rose earlier in the day on Wednesday.

U.S. health officials on Wednesday confirmed the country's first case of the new, heavily mutated Covid omicron variant in California. The patient has mild symptoms that appear to be improving, according to White House chief medical advisor Dr. Anthony Fauci.

Bond yields had a muted reaction to news of the omicron case. The major averages reversed their gains and closed lower. The Dow Jones Industrial Average lost more than 460 points on Wednesday.

"It's not severe and everything that we've seen seems to suggest it's not really a game-changer in terms of implementation of new restrictions or anything like that," said Ben Jeffery, BMO rate strategist.

Investors continue to watch for developments on the new omicron Covid-19 variant, with uncertainty around its rate of transmissibility and fears that it could evade vaccines.

Meanwhile, monetary policy has also been in focus for investors. Fed Chairman Jerome Powell indicated in a testimony in front of Congress on Tuesday that the central bank may quicken the pace of its asset tapering schedule.

Powell said that he thought the Fed could pull back its bond-buying program faster than the $15 billion-a-month schedule announced in November.

"I think that the taper need not be a disruptive event in markets. I don't expect that it will be. It hasn't been so far. We've telegraphed it," Powell said during Congressional testimony on Wednesday.

On Wednesday, payroll services firm ADP reported 534,000 jobs added in November, above expectations of 506,000.

Elsewhere, the ISM Markit manufacturing PMI came in lower than expected, but the ISM version matched estimates. A reading for construction spending in October rose slower than expected but saw positive revisions to help offset the miss.

—CNBC's Hannah Miao contributed to this report.

Copyright CNBCs - CNBC
Contact Us