TREASURIES-Yields rise as virus variant concerns ease

BY Reuters | TREASURY | 11/29/21 03:53 PM EST
    (Recasts, updates yields, adds analyst comments)
    By Karen Pierog
    CHICAGO, Nov 29 (Reuters) - U.S. Treasury yields mostly rose
and the curve steepened 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 and rose as high as 1.565% earlier on
Monday, was last up 3.6 basis points at 1.5209%. Yields move
inversely to prices.
    On the shorter end of the curve, yields also retreated from
earlier session highs, with the two-year yield, which
reflects short-term interest rate expectations, last down less
than a basis point at 0.5157%. On Friday, it tumbled almost 14
basis points, marking its steepest daily fall since March 2020.
    Subadra Rajappa, head of U.S. rates strategy at Societe
Generale in New York, said while the flight-to-quality bid that
fueled Friday's rally abated as more information on the new
Omicron variant emerged, Treasuries were in "a bit of a back and
forth with the stock market" on Monday.
    "Broadly speaking, bonds are trading very much in line with
how treasuries are reacting," she said, noting that yields
rallied a little when Wall Street pulled back from earlier
gains.
    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 Kim
Rupert, managing director of global fixed income analysis at
Action Economics in San Francisco.
    "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."
    Rajappa said the jobs report along with November consumer
price index data due out next week should set the tone for the
Fed, which meets Dec. 14 and 15.
    "The fundamental question remains if they are concerned
about inflation does it makes sense for them to remain dovish
and patient on policy?" she said. "If we get another high print,
that might hasten the Fed's sense of urgency to perhaps taper
faster and embark on rate hikes sooner than people expected."
    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 3.2 basis points steeper
at 100.50 basis points. The spread between five-year notes and
30-year bonds was last up 3.2 basis points at
68.80 basis points.
November 29 Monday 3:32PM New York / 2032 GMT
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             0.0475       0.0482    -0.005
 Six-month bills               0.0925       0.0938    0.003
 Two-year note                 99-248/256   0.5157    -0.004
 Three-year note               99-208/256   0.8143    -0.006
 Five-year note                100-84/256   1.1822    0.001
 Seven-year note               100-130/256  1.4235    0.016
 10-year note                  98-168/256   1.5209    0.036
 20-year bond                  101-24/256   1.9337    0.051
 30-year bond                  100-12/256   1.8729    0.043

   DOLLAR SWAP SPREADS
                               Last (bps)   Net
                                            Change
                                            (bps)
 U.S. 2-year dollar swap        23.50         0.75
 spread
 U.S. 3-year dollar swap        22.75         1.50
 spread
 U.S. 5-year dollar swap        11.50         1.00
 spread
 U.S. 10-year dollar swap        5.00         0.50
 spread
 U.S. 30-year dollar swap      -17.25         0.50
 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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