Bond Report: Treasury yields on track for weekly decline as growth worries rise


U.S. Treasury yields turned mixed on Friday, with long-dates on track for a weekly decline as the spread of the coronavirus delta variant contributes to unease over the global economic growth outlook.

What are yields doing?
  • The yield on the 10-year Treasury note

    was at 1.242%, versus 1.241% at 3 p.m. Eastern on Thursday. Yields and debt prices move in opposite directions.
  • The 2-year Treasury note yield

    rose to 0.222% versus 0.218% late Thursday.
  • The 30-year Treasury bond yield

    fell to 1.872%, compared with 1.877% on Thursday.

The 10-year yield ended last week at 1.297%, while the 2-year yield was at 0.215% and the 30-year rate stood at 1.948%.

What’s driving the market?

In the absence of any U.S. economic data releases today, investors remained focused on the delta variant’s impact on the economy. One Federal Reserve policy maker saying he may rethink his call for a tapering of bond purchases to start in October, if the variant slows economy.

Read: Delta variant is creating cascade of reasons to question U.S. recovery in the second half

In an interview with Fox Business Network on Friday, Federal Reserve Bank of Dallas President Robert Kaplan said the variant has caused him to have an open mind about the path of monetary policy. He called it “the big imponderable” in the outlook.

“It is in all of our interest to slow the spread, and right now we’re in a negative trend,” said Kaplan, a non-voting member of the Federal Open Market Committee this year.

See: Investors ‘want answers — and they want it immediately,’ says bond portfolio manager about delta variant

Meanwhile, attention is turning toward next week, particularly the Kansas City Federal Reserve Bank’s annual symposium in Jackson Hole, Wyoming. The high-profile event will be watched for clues from policy makers on the timing of the Fed’s plans to begin tapering its monthly asset purchases. Minutes of the Fed’s July policy meeting showed “most” members were in favor of beginning the process this year.

Despite global growth fears, the Dow Jones Industrial Average

and S&P 500 Index

popped higher Friday to cap a turbulent week, as technology shares score and investors troll for opportunities.

What are analysts saying?
  • “Today could go one of two ways,” said Kit Juckes, global macro strategist at Société Générale, in a note. “Either, typical of COVID-era Fridays, markets will be quiet and everyone will metaphorically head for the beach early; or, growth concerns will take hold in earnest and we’ll see dollar strength, equity weakness, commodity price falls continue and bond yields will drift down in anticipation that the Fed uses ‘the delta variant’ as justification for hinting that tapering may be pushed back,” he said.
  • “The Fed now looks likely to begin tapering its asset purchases later this year, but the precise timing could depend on the extent of any economic drag from the continued rapid spread of the Delta coronavirus variant,” Andrew Hunter of Capital Economics wrote in a note.

Extra Credit: How college closures affect taxpayers and students: ‘You stole my money and I’m $188,000 in debt and for what?’

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