The 10-year Treasury yield briefly slipped below 1.15%, trading at its lowest level since February, amid a relentless rally in government bonds and mixed U.S. data on Monday.

The moves come after July brought the biggest monthly declines for the rates on 2- and 10-year notes since March 2020.

What are yields doing?

The yield on the 10-year Treasury note

was at 1.173% at 3 p.m. Eastern, down 6.6 basis points from its level at the same time Friday. That marked the lowest finish for the 10-year rate, based on 3 p.m. yield levels, since Feb. 11, according to Dow Jones Market Data. The yield dipped as low as 1.143%, according to FactSet. Yields for debt fall as prices rise.

The 30-year Treasury yield

slipped to 1.853% versus 1.896% Friday afternoon.

The 2-year Treasury note rate

fell to 0.174%, compared with 0.188% on Friday.

What’s driving the market?

Long-end Treasury yields deepened their slide Monday, as the spread of delta variant continued apace and investors focused on central bank’s continued government-bond buying. Meanwhile, stock indexes largely gave up their earlier gains.

A bipartisan group of senators late Sunday unveiled details of a nearly $1 trillion infrastructure package. A lengthy debate lies ahead for the measure, a priority of President Joe Biden.

The final reading of IHS Markit’s purchasing managers index for the U.S. in July was 63.4 versus an initial 63.1. Meanwhile, the Institute for Supply Management’s July manufacturing index fell to six-month low due to broad shortages and construction spending was up 0.1% in June.

Speculation remains around the timing of when the Federal Reserve will lay out a timetable for tapering its program of monthly asset purchases. Fed Gov. Lael Brainard, in a Friday speech, made remarks that suggested she doesn’t expect policy makers to be in position to announce a plan until this fall.

Brainard said the Fed would be better positioned to assess progress by the labor market toward the central bank’s goals in October, when spending, school and work patterns “should settle into a post-pandemic normal,” The Wall Street Journal reported.

In China, data released Saturday by the National Bureau of Statistics showing the country’s official purchasing managers index fell to 50.4 in July from 50.9 in June. Numbers above 50 indicate expansion on the 100-point scale.

The main event on the U.S. economic calendar comes Friday, with the release of the July jobs report.

What are analysts saying?

“Participants in the U.S. Treasury market do not care about inflation” for now, Daniel Tenengauzer, head of markets strategy and insights for BNY Mellon, said in a phone interview. “The fact that inflation is very high does not matter for those buying U.S. Treasurys at the moment.”

What does matter is that the Fed is likely to continue buying at least $80 billion in Treasurys a month through the end of the year, in BNY Mellon’s view, and other market participants such as banks are being “forced into the market” due to balance-sheet needs, he said. With so many investors buying “no matter what,” that is likely to have a massive impact on the timing of the Fed’s decision to taper going forward.

“U.S. payroll data this week will be a key focus for the market, particularly after Fed
Chair Powell seemed to put more focus on the labor market than inflation as the
arbiter of the Fed’s upcoming tapering decision,” said Steve Barrow, head of G-10 strategy at Standard Bank, in a note.

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