10-year Treasury yield bounces after Friday’s omicron-sparked slide

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Long-run Treasury yields rose Monday morning, seeing some declines as investors piled into US government debt during Black Friday in stocks and oil sparked by the discovery of an Omicron version of the coronavirus. Was.

What is the produce doing?
What is driving the market?
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Yields increased on Monday anecdotal report Physicians in South Africa indicate that omicron symptoms are no more severe than in previous surges, prompting early action to promote an overall feeling. Later, President Joe Biden described the version as “a cause for concern, not a cause for panic” and said Americans would not face “shutdowns or lockdowns”.

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While questions remain about the transmissibility of the Omicron variant and definitive assessments are still weeks away, investors appeared to have sold Treasuries and were ready to dive back into the riskier asset.

In a chart: Only 10% of investors see Omicron as biggest threat to financial markets by year’s end: Flash poll

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US benchmark stock indices were rising in Monday’s trading after a sharp sell-off on Friday. Oil futures were also rebounding from their fall on Friday, which sent West Texas Intermediate crude for January CLF22,
+2.23%

CL00,
+2.23%
down 13%.

Friday’s rally in the Treasury was the biggest since the early days of the pandemic, and was amplified by holiday trading conditions in a short session the day after Thanksgiving.

On Friday, the World Health Organization’s technical advisory group declared Omicron “a variant of concern,” with several countries banning flight from countries in southern Africa, where the variant was first discovered. According to media reports, Omicron has been detected in about a dozen countries.

Before the new version was discovered, investors leaned toward the ability for the Federal Reserve to announce that it was ready to accelerate asset purchases at its December policy meeting. Some analysts said the emergence of the Omicron variant is being seen as a possibility of a quick tempering.

What are analysts saying?

“We still know almost nothing for sure whether Omicron is more transmissible or lethal than other coronavirus variants, but it adds to the downside risks, which are already increasing with a winter increase in infections in the Northeast and Midwest. Were there,” said Paul. Ashworth, Chief North America Economist, Capital Economics.

“Under those circumstances, we think it is unlikely that the Fed will accelerate its QE taper.” [its Dec. 14-15] FOMC meeting, which could pave the way for a hike in interest rates early next year,” Ashworth said in a note. “There is some debate about whether Omicron will add to inflationary pressures if it exceeds supply by demand. But the fall in energy prices suggests that, initially at least, the impact will be strongly deflationary.”

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