TREASURIES-Yields climb as virus variant-induced investor panic ebbs

BY Reuters | TREASURY | 11/29/21 10:09 AM EST
    (Changes dateline to Chicago, recasts, updates yields, adds
analyst comments)
    By Karen Pierog
    CHICAGO, Nov 29 (Reuters) - U.S. Treasury yields bounced
higher on Monday amid a waning flight-to-safety bid that had
been triggered by the detection of a new coronavirus variant
last week, leading to the market's biggest rally since the onset
of the pandemic.
    The benchmark 10-year yield, which dropped as
low as 1.473% on Friday, was last up 7.4 basis points at
1.5586%. After tumbling to 1.161% last week, the five-year yield
 was last 4.1 bps higher at 1.2225%. Yields move
inversely to prices.
    The two-year yield, which reflects short-term
interest rate expectations, was last up 2.1 basis points at
0.5413%, giving back a bit of Friday's almost 14-basis-point
drop -- the steepest daily fall since March 2020.
    "A lot of that panic is coming off today," said Kim Rupert,
managing director of global fixed income analysis at Action
Economics in San Francisco, noting that "markets just jumped to
an immediate conclusion" at the end of last week.
    Analysts said the emergence of the new variant, called
Omicron, will likely keep investors on guard for a few weeks
until more is known about its severity and response to vaccines.

    Wall Street opened higher, rebounding a bit from Friday's
big drop.
    Meanwhile, month-end positioning this week might create some
volatility in the Treasury market ahead of Friday's release of
the U.S. government's November employment report and what it
could mean in terms of Federal Reserve moves, according to
Rupert.
    "I'm not sure (Fed Chair Jerome) Powell really needs a huge
number to get maybe a speed-up of the (quantitative easing)
taper next month," she said. "He was saying it was not one
number he's interested in. He's looking at the cumulative effect
and so far, the cumulative effect has been pretty decent."
    Yield curves steepened. A closely watched part of the curve
that measures the gap between yields on two- and 10-year
Treasury notes was last 4.1 basis points steeper
at 101.4 basis points. The spread between five-year notes and
30-year bonds was last up 2.1 basis points at
67.70 basis points.
    November 29 Monday 9:46AM New York / 1446 GMT
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             0.05         0.0507    -0.002
 Six-month bills               0.0925       0.0938    0.003
 Two-year note                 99-235/256   0.5413    0.021
 Three-year note               99-184/256   0.8464    0.026
 Five-year note                100-34/256   1.2225    0.041
 Seven-year note               100-64/256   1.4623    0.055
 10-year note                  98-80/256    1.5586    0.074
 20-year bond                  100-156/256  1.9629    0.080
 30-year bond                  99-120/256   1.8983    0.068

   DOLLAR SWAP SPREADS
                               Last (bps)   Net
                                            Change
                                            (bps)
 U.S. 2-year dollar swap        23.00         0.25
 spread
 U.S. 3-year dollar swap        22.50         1.25
 spread
 U.S. 5-year dollar swap        11.25         0.75
 spread
 U.S. 10-year dollar swap        5.00         0.50
 spread
 U.S. 30-year dollar swap      -17.00         0.75
 spread


 (Reporting by Karen Pierog in Chicago and Tom Westbrook in
Sydney
Editing by Shri Navaratnam and Andrea Ricci)

In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

Before investing, consider the funds' investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information. Read it carefully.

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