TREASURIES-Yields fall to three-week lows on Omicron fears

BY Reuters | TREASURY | 11/30/21 09:59 AM EST
       * Market rallies after Moderna (MRNA) CEO's vaccine warning
    * 10-year yield set to log monthly decline
    *

 (Adds Chicago dateline and analyst comments, updates yields)
    CHICAGO, Nov 30 (Reuters) - U.S. Treasury yields tumbled to
multi-week lows on Tuesday after the head of drugmaker Moderna (MRNA)
raised concerns about the efficacy of vaccines against the
Omicron coronavirus variant, sparking demand for safe haven
assets.
    The benchmark 10-year note yield, which fell to
a three-week low of 1.419%, was last down 10 basis points at
1.429% as the market returned to a rally mode that was triggered
late last week with news of the Omicron variant's emergence.
Yields move inversely to prices.
    Moderna's (MRNA) CEO told the Financial Times https://www.ft.com/content/27def1b9-b9c8-47a5-8e06-72e432e0838f
 that present vaccines would likely be less effective against
the new variant and that it would be a risk to completely shift
production to an Omicron-targeted dose while other variants
remained in circulation.
    "The head of Moderna (MRNA) saying that the vaccines will be less
good is what's driving the move," said Lyn Graham-Taylor, senior
rates strategist at Rabobank in London.
    Month-end factors were also in play, according to George
Goncalves, head of U.S. macro strategy at MUFG in New York.
    "I feel like there's a bit of scrambling going on just to
fill duration needs for the index," he said. "So you have that
trade most likely happening and then you have the fear trade, of
course."
     The market moves have the 10-year note heading toward
snapping three months of selling to post a monthly gain, with
yields down about 14 basis points in November as investors reel
back wagers on higher rates.
    Shorter and longer-dated Treasuries also rallied on Tuesday.
    The two-year yield, which reflects short-term
interest rate expectations, was last down 4.9 basis points at
0.4607% and the five-year yield was 9 basis points lower at
1.0954%.
    The 30-year bond yield, which hit its lowest level since
Nov. 9, was last down 7.3 basis points at 1.8072%.

    Meanwhile, the market was awaiting Tuesday's Congressional
testimony by Federal Reserve Chair Jerome Powell and Treasury
Secretary Janet Yellen.
    In prepared remarks already released, Powell noted Omicron
posed risks to growth and said inflation could persist longer
than first thought.
    A closely watched part of the curve that measures the gap
between yields on two- and 10-year Treasury notes
was last 4.6 basis points flatter at 96.60 basis points. The
spread between five-year notes and 30-year bonds
was last less than a basis point steeper at 71 basis points.
      November 30 Tuesday 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    -0.005
 Two-year note                 100-20/256   0.4607    -0.049
 Three-year note               100-2/256    0.7473    -0.065
 Five-year note                100-192/256  1.0954    -0.090
 Seven-year note               101-40/256   1.3264    -0.102
 10-year note                  99-128/256   1.429     -0.100
 20-year bond                  102-80/256   1.8607    -0.078
 30-year bond                  101-144/256  1.8072    -0.073

   DOLLAR SWAP SPREADS
                               Last (bps)   Net
                                            Change
                                            (bps)
 U.S. 2-year dollar swap        23.50        -0.25
 spread
 U.S. 3-year dollar swap        21.75        -1.00
 spread
 U.S. 5-year dollar swap        11.75         0.25
 spread
 U.S. 10-year dollar swap        5.75         0.75
 spread
 U.S. 30-year dollar swap      -17.75        -0.25
 spread




 (Reporting by Karen Pierog and Tom Westbrook, additional
reporting by Dhara Ranasinghe and Yoruk Bahceli; Editing by Kim
Coghill, Kirsten Donovan)

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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