Treasuries See Further Downside As Omicron Worries Continue To Fade

Following the sharp pullback seen over the two previous sessions, treasuries saw further downside during trading on Wednesday.

Bond prices climbed off their worst levels in afternoon trading but remained in negative territory. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 2.9 basis points to 1.509 percent.

The extended decline by treasuries came as concerns about the Omicron variant of the coronavirus continued to ease following comments from Pfizer (PFE) and BioNTech (BNTX) regarding the effectiveness of their vaccine.

Pfizer and BioNTech said preliminary laboratory studies have demonstrated that three doses of their vaccine neutralize the Omicron variant.

"Although two doses of the vaccine may still offer protection against severe disease caused by the Omicron strain, it's clear from these preliminary data that protection is improved with a third dose of our vaccine," said Pfizer Chairman and Chief Executive Officer Albert Bourla.

He added, "Ensuring as many people as possible are fully vaccinated with the first two dose series and a booster remains the best course of action to prevent the spread of COVID-19."

The claims from Pfizer and BioNTech come after initial indications the Omicron variant could be vaccine-resistant contributed to a post-Thanksgiving rally by treasuries.

Meanwhile, the Treasury Department revealed this month's auction of $36 billion worth of ten-year notes attracted slightly below average demand.

The ten-year note auction drew a high yield of 1.518 percent and a bid-to-cover ratio of 2.43, while the ten previous ten-year note auctions had an average bid-to-cover ratio of 2.47.

The bid-to-cover ratio is a measure of demand that indicates the amount of bids for each dollar worth of securities being sold.

Looking ahead, the Treasury is due to announce the results of this month's auction of $22 billion worth of thirty-year bonds on Thursday.

Trading on Thursday may also be impacted by reaction to the weekly jobless claims report, although traders may look ahead to Friday's report on consumer price inflation and next week's Federal Reserve meeting.

For comments and feedback contact: editorial@rttnews.com

Market Analysis

Follow RTT