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Bond Market Commentary

Updates on bond market data, news, and activity each day.

December 8, 2021

Over in bond land, longer-dated Treasuries are modestly higher ahead of the opening bell Wednesday as market participants continue to assess pandemic-related headlines. Across the pond, a report suggested that U.K. Prime Minister Boris Johnson planned to announce restrictions to slow the spread of the Omicron COVID-19 strain, pushing the 10-year U.K. bond yield to its lowest level in three months. This news pressured domestic Treasury yields too, though U.S. rates rebounded after a report indicated the latest variant was neutralized by three doses of the Pfizer-BioNTech vaccine. This morning, the yield on the benchmark 10-year note is down two basis points (100 basis points equals 1%) to 1.46% ahead of this afternoon’s $36 billion auction of this maturity. The yield on the 30-year bond is off one basis point to 1.79%. Meanwhile, on the short end of the curve, the yield on the two-year note is holding steady at 0.69%, its highest level since March 2020. On the economic data front, a release this morning revealed MBA mortgage applications bounced back 2% in the latest week from the previous period’s 7.2% decline. Later this morning at 10:00 a.m. ET, the Jobs Openings and Labor Turnover Survey (JOLTS) is anticipated to show 10.47 million available positions in October, compared to the previous 10.44 million in September. In central bank news, the Federal Reserve (Fed) remains in its quiet period ahead of the upcoming December 14-15 Federal Open Market Committee (FOMC) meeting, during which time officials could announce plans to dial back their bond-buying program at a faster pace in light of persistent price pressures. (Last week, government securities rallied on the heels of perceived hawkish comments by Fed Chair Jerome Powell and several other central bank officials, who admitted that inflation could no longer be characterized as “transitory.”) Overall, Treasuries weakened on Tuesday with the yield curve flattening as risk sentiment improved on upbeat pandemic headlines. Wall Street continued to reevaluate the economic impact of the Omicron COVID-19 variant, with preliminary data indicating the new strain appears to be milder than originally thought. Also buoying the mood were results of a laboratory study that showed GlaxoSmithKline (GSK) and Vir Biotechnology’s (VIR) joint antibody treatment was effective against the Omicron variant. The yield on the 10-year note was up four basis points to 1.48%, while the two-year note yield spiked six basis points to 0.69%. Notably, $54 billion of three-year notes were sold at a high yield of 1.00% yesterday, the highest auction yield since February 2020. Robust demand from investors left dealers with just 29.8% of the issue, among the lowest share in the last 10 years. Elevated inflation and the expectation that the Fed will need to tighten monetary policy has propelled short-term yields to the highest levels of the year.

Municipal Market Commentary

The Bloomberg 30-day visible supply rose $3.108 billion to $20.858 billion on Tuesday--a 12-month high--above the 12-month average of $11.354 billion.

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