Treasurys extended their rally Monday, driving the yield on the 10-year note below 1.23% to a five-month low, as investors worried about the continued spread of the delta variant of the coronavirus that causes COVID-19 sought safety in bonds.

How Treasurys are performing

The yield on the 10-year Treasury note

slumped 7.3 basis points to 1.229%, trading at its lowest since Feb. 16 and falling below its 200-day moving average at 1.257%, according to FactSet.

The 2-year Treasury note yield a

was down 2 basis points at 0.214%.

The 30-year Treasury bond yield

dropped 8.1 basis points to 1.844%.

Yields fell last week. The 10-year yield fell 5.4 basis points, while the 30-year Treasury was off 5 basis points, representing a third consecutive yield slide for the durations. The 2-year, however, posted a weekly climb of 1.1 basis points, marking its largest weekly gain since the period ended June 25, according to data compiled by Dow Jones Market Data.

What’s driving the market?

Global equity markets and other assets viewed as risky were under pressure Monday, with much of the blame attributed to jitters around the continued spread of the delta variant, driving investors to seek safety in Treasurys and other so-called core government debt, such as German bunds, analysts said.

Treasury yields have retreated significantly after nearing 1.80% in March on expectations for a surge in growth and inflation as the economy reopens. The so-called reflation trade, however, has seen an unwinding, which has accelerated as concerns about the spread of the delta variant have raised doubts about the pace of the recovery in the months ahead.

The scope of the fall in yields, however, has also sparked debate, with investors questioning whether investors have grown too complacent about inflation risks.

Read: Does the bond market have it wrong about inflation?

What are traders and analysts saying?

“Uncertainty on the impact of new corona outbreaks causes investors to continue to err to the cautious side. Core bonds remain well bid,” wrote analysts at KBC Bank, in a note.

“From a technical point of view, the U.S. 10-year yield declining below 1.25% and German 10-year yield

giving up -0.38% would flash further red lights on the reflationary narrative,” they said.

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