Treasury prices dropped on Monday, leading to a rise in the yields, as investors opened the week by shifting away from the traditional safe-haven assets toward more risky items as the start of the COVID-19 vaccine rollout has begun and with more fruitful talks of a compromise spending relief by lawmakers seems more likely.
The 10-year Treasury note, the benchmark of the yields, rose by as much as 4.4 basis points to .931% with the 2-year note seeing it’s yield rise by as much as .8 basis points to .121%. Finally the 30-year Treasury bond yield went up by as much as 5.1 basis points to 1.678%. If you were unaware the yields and debt prices move in opposite directions of each other.
What’s causing this shift? Well with Pfizer Inc beginning shipments of the vaccine it created in part with Germany’s BionTech SE around the country including a celebratory shipment from their Michigan production facility to distribution centers happened after the Friday evening announcement by the Food and Drug Administration that it’s vaccine would be granted emergency authorization for public use in the United States. This came as the number of currently infected COVIC-19 patients continued to surge, putting more pressure on lawmakers to finally reach a deal on a second round of stimulus spending.
A group of bipartisan lawmakers in both the House and Senate are trying to get a compromise $908 billion plan through the chamber which would put $160 billion of aid to states and municipalities and business lawsuit immunity in a separate package. This would leave a $300 per week bump for state unemployment benefits for four months as well as $300 billion to small businesses and $35 billion to health care providers. Meanwhile, the final policy meeting of the Federal Reserve is set for Tuesday and Wednesday.
The head of United States rate strategy at BMO Capital markets, Ian Lyngen, said in a note that, “The overnight price action appears to be favoring [a Fed] meeting that reveals no change to the composition of bond purchases as last week’s bull flattening has been partially reversed.” Putting the 10-year Treasury yield at 93 basis points, “leaves the Treasury market decidedly midrange and the next two sessions will be meaningful insofar as establishing the departure point for rates ahead of the Fed and indirectly skewing the probability for a bearish break by year-end. 1%.”