Most Treasury yields remained higher on Wednesday after minutes from the Federal Reserve’s July meeting showed most officials backing a 2021 start to tapering asset purchases, and as policy maker James Bullard told MarketWatch that the coronavirus delta variant won’t derail the economy.

What are yields doing?

The yield on the 10-year Treasury note

rose to 1.273%, compared with 1.258% at 3 p.m. Eastern on Tuesday. Yields and debt prices move in opposite directions.

The 2-year Treasury note yield

was at 0.217%, compared with 0.215% on Tuesday.

The 30-year Treasury bond yield

declined to 1.913% from 1.919% Tuesday afternoon. The rate has had the largest four-day decline in more than a month, according to Dow Jones Market Data.

What’s driving the market?

Minutes of the Fed’s July 27-28 meeting, released Wednesday, showed that most of the 19 top Fed officials said that they thought it would be appropriate to start reducing the $120 billion monthly pace of asset purchases this year. These officials said they thought the Fed’s benchmark of “substantial further progress” criterion had been met in terms of inflation, and was “close to being satisfied” in terms of the employment goals.

Also on Wednesday, Bullard, president of the Fed’s regional bank in St. Louis, said in a Barron’s Live interview with MarketWatch that the U.S. economy won’t be derailed by the spreading delta variant of the coronavirus because businesses and households have adapted to the pandemic. His remarks came a day after Fed Chairman Jerome Powell was more cautious on Tuesday, saying it was still unclear how it might impact the economy.

In U.S. economic data, housing starts slumped in July, likely as a reflection of the continued supply constraints that construction firms faced nationwide. U.S. home builders started construction on homes at a seasonally-adjusted annual rate of 1.53 million in July, representing a 7% decrease from the June’s upwardly-revised figure, the U.S. Census Bureau reported.

Permitting for new homes occurred at a seasonally-adjusted annual rate of 1.64 million, up 2.6% from June and 6% from a year ago.

Meanwhile, Treasury’s $27 billion auction of 20-year bonds was “solid,” according to strategist Ben Jeffery of BMO Capital Markets.

What are analysts saying?

“Absent a significant reversal in the strong jobs numbers or inflation data, the minutes reflect a Fed that is prepared to accelerate its taper timeline to perhaps the next few months,” Sean Bandazian, investment analyst for Cornerstone Wealth, wrote in an e-mailed note. “While we are not convinced Powell will announce any taper next week at Jackson Hole, it is clear from the minutes that many Fed members are prepared to recommend an imminent tapering of asset purchases. Both the Fed and market participants learned lessons from the Taper Tantrum. While we expect less of a surprise this time around, there is still reason to believe we will see volatility throughout areas of the market with high sensitivity to interest rates.”

“The climb in cases of the delta variant and the Fed’s turn toward consideration of a reduction in its stimulus efforts have spurred an adjustment to investor perceptions about the pace and character of reopening,” Jim Smigiel, chief investment officer at SEI Investments Co., said in a note. Even so, “investors can still expect the next couple years to deliver one of the strongest growth rebounds of the postwar period courtesy of unprecedented stimulus efforts and pent up demand.”

“It’s clear from the minutes that the Fed isn’t ready to start tapering yet, but they are leaning towards making an announcement by the end of the year at the latest,” Chris Zaccarelli, chief investment officer for Independent Advisor Alliance, said in an e-mailed note. “In the short run, the market is going to remain focused on growth and delta variant concerns, but as we move past those challenges, the good news about the economy and job market should give investors a renewed boost of confidence.”

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