Treasury yields edge up as omicron fears fade and Fed meeting looms next week

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US Treasury yields rose again on Tuesday morning as fears the Omicron version of the coronavirus could slow the economy, while investors looked at the possibility of a sharp reduction in their bond purchases by the Federal Reserve at its policy meeting next week. waited for

What is the produce doing?
What is driving the market?
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Shares jumped in the early days of trading on Tuesday with the Dow Jones Industrial Average (DJIA).
+1.54%,
s&p 500 index spx,
+2.14%
and Nasdaq Composite Comp,
+2.96%
Poised for another day of strong gains, on hopes that the Omicron version of the coronavirus that causes COVID-19 will be less severe and therefore less damaging to the global economic recovery.

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Investors were also taking some comfort from the decision of the People’s Bank of China on Monday. Reduce reserve requirement ratio for banks To stimulate its slowing economy in the wake of a slump in the property market, up 0.5 percentage points to 8.4% since December 15.

Those factors combined were putting some pressure on safe havens such as government bonds.

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See: The Fed is widely seen favoring a sharp taper next week

Returns on government debt are still relatively low, however, given that the Federal Reserve may announce a plan next week to sharply reduce monthly bond purchases to combat rising inflation. However, the Treasury has pulled some bids as fixed-income investors are positioning as if the Fed would make a policy mistake that would hurt the economy.

The Fed’s next policy gathering is scheduled for December 14-15 and policymakers are in a media blackout period until then.

In data released Tuesday, the US trade deficit narrowed nearly 18% to $67.1 billion in October from a record $81.4 billion in the previous month, the biggest increase in exports in 13 years and a slowdown in imports tied to overcrowding at domestic ports. after.

Meanwhile, the decline in US productivity in the third quarter was revised down to 5.2% instead of 5%, as previously reported. And unit-labor costs jumped 9.6% against the original 8.3% reading, reflecting higher wages that companies are paying to attract more employees amid a huge labor shortage.

Looking ahead, TMUBMUSD03M auctions $54 billion in 3-year notes,
0.052%
Scheduled for 1 p.m. ET.

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