Long dated U.S. Treasury yields fell Thursday, pressured by worries about the spread of the coronavirus delta variant on the economic outlook even as minutes of the Federal Reserve’s July meeting, released Wednesday, showed most policy makers in favor of beginning to scale back monetary stimulus later this year.

What are yields doing?

The yield on the 10-year Treasury note

fell to 1.241%, down from 1.273% at 3 p.m. Eastern on Wednesday.

The 2-year Treasury note yield

rose slightly to 0.218% from 0.217% late Wednesday.

The yield on the 30-year Treasury bond

dropped to 1.877% from 1.913%. The yield has dropped for five straight trading days, the longest losing streak since May, according to Dow Jones Market Data.

What’s driving the market?

Investors snapped up Treasurys on growing worries that rising COVID-19 cases caused by the coronavirus delta variant could take a toll on economic activity. Economists at Goldman Sachs Group Inc., one of Wall Street’s most bullish firms, have cut their outlook for third-quarter U.S. economic growth to 5.5% from 9% previously.

The global tally for the coronavirus-borne illness climbed above 209.3 million as of early Thursday, while the death toll rose to 4,393,138, according to data aggregated by Johns Hopkins University. Meanwhile, a U.K. study from the University of Oxford, based on real-world data, showed diminished effectiveness for coronavirus vaccines against the delta variant. And U.S. federal health officials have said that those who have received the vaccines from Moderna Inc. MRNA and from Pfizer Inc. and BioNTech SE will be eligible for a third dose, starting in September.

U.S. stocks staged a late-day rebound, with the S&P 500 Index
Dow Jones Industrial Average

and Nasdaq Composite Index

all headed for gains Thursday afternoon after a two day sell off. The moves come after minutes of the Fed’s July policy meeting, published Wednesday, showed that “most” officials were in favor of starting to reduce monthly purchases of bonds later this year. Tapering is being seen by many investors as the removal of stimulus, even though the Fed would still be buying bonds at a lower pace.

In U.S. data, weekly jobless benefit claims dropped to pandemic era low of 348,000 in a sign that companies are still hiring despite the delta variant. Initial jobless claims dropped by 29,000 to 348,000 in the week ended Aug. 14, the government said Thursday. Economists had expected the number of initial claims last week to fall to 365,000.

The Philadelphia Federal Reserve Bank’s August manufacturing index fell for a fourth straight month amid rising prices. Meanwhile, the Conference Board’s index of leading economic indicators climbed in July, suggesting little evidence to suggest delta has had a big impact on the U.S. economy.

What are analysts saying?

“When you combine everything, it’s hard to be upbeat and have risk appetite in mind,” Edward Moya, senior market analyst for the Americas at Oanda Corp., said via phone. “There’s still tremendous froth in the market, and we will probably see valuations take a hit as the global economic recovery struggles. The market is unclear how the rest of year is going to unfold, and there are too many question marks to be optimistic about the third and fourth quarters.”

“Rising delta worries are part of the story to recent U.S. Treasury strength,” said David Gagnon, a San Diego-based managing director and head of Treasurys trading for Academy Securities. “Until we get a catalyst to push rates higher, the huge liquidity from global central banks is forcing investors to buy US Treasuries more because they `have to’ rather than they `want to.’ ” 

“Bond prices are stronger on a flash crisis of confidence in equities around the world, a shift tied to the FOMC’s view last month the taper should begin this year,” Jim Vogel, executive vice president at FHN Financial, wrote in a note. “Rather than lash the market reaction to the event itself, consider that sell-off timing is investor driven as they were waiting to take profits until they saw the minutes just in case it contained a dovish surprise.”

“There are a ton of headwinds getting placed in front of an economy that was bouncing back,” said Tony Farren, the Stamford, Connecticut-based managing director of Mischler Financial Group. “It wasn’t long ago that we thought COVID was behind us.”

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