Long US Treasury yields rose on Wednesday, while short-dated yields held steady, with investors seeing only a limited economic impact from the Omicron version of COVID, noting that it produced milder symptoms than earlier strains .
What is the produce doing?
What is driving the market?
The Omicron variant is expected to be lighter than other strains and cause fewer restrictions on commerce and mobility, supported purchases of riskier assets in the last week of 2021 and provided less need for safe-haven bonds .
The number of reported COVID-19 cases around the world increased by 11% last week compared to the previous week, led by the US, the World Health Organization reported, but so far hospitalizations have only increased gradually .
Still, concerns remain about economic growth in the coming year, keeping long-term Treasury yields up while the 2-year Treasury note hovers around its highest level since March of 2020. GDP is on track to expand by about 6% in 2021. A decrease of 3.5% in 2020, its sharpest trough-to-peak rebound in more than half a century, but could drop to 4% or less next year, according to Economist magazine. However, with inflation nearing a 40-year high, higher interest rates are likely from the Federal Reserve in 2022.
Looking ahead on Wednesday, investors will watch another auction, with $59 billion in 7-year notes TMUBMUSD07Y,
On offer at 1 p.m. Eastern Time.
In US economic reports, investors are watching a report on international trade in goods at 8:30 a.m. ET, as well as readings of retail and wholesale inventory for November. A report on pending home sales for November is due at 10 am
What are strategists saying
Jim Vogel, executive vice president of FHN Financial, wrote, “While economists’ track record of incorporating the pandemic into their calculations has been spotty, at least they have provided a veneer of confidence to the potential outcomes.” “With Omicron, financial markets don’t have that either. One thing that has become increasingly apparent in the figures after Christmas is the rapid increase in hospitalizations in the largest US states. Over the past week The growth trend is vertical in some areas,” he wrote.