U.S. Treasury prices were mixed on Tuesday, with the 10-year yield moving marginally higher and remaining stuck near an almost six-month low.

What are yields doing?

The 10-year Treasury note yield
TMUBMUSD10Y,
1.186%

rose to 1.181% compared with 1.173% at 3 p.m. Eastern on Monday, which was the lowest level for the 10-year yield since Feb. 11, based on 3 p.m. yields, according to Dow Jones Market Data.

The 2-year Treasury note yield
TMUBMUSD02Y,
0.176%

was little changed at 0.172% versus 0.174% Monday afternoon.

The yield on the 30-year Treasury bond
TMUBMUSD30Y,
1.855%

slipped to 1.850% compared with 1.853% Monday afternoon.

What’s driving the market?

Concerns about the coronavirus delta variant slowing economic growth in the U.S. and other countries remain in focus. President Joe Biden is set to address Americans Tuesday with a fresh plea for unvaccinated people to get their shots and protect themselves against the variant, which the nation’s leading public health agency has determined is more than twice as contagious as earlier strains.

The seven-day moving average of new U.S. Covid cases stood at 72,000 as of July 31, according to data compiled by the CDC. However, the CDC data also shows 70% of U.S. adults have had at least one shot of a Covid-19 vaccine.  Mask mandates have been reintroduced in parts of the U.S., including Louisiana and San Francisco. China has also announced mass testing in Wuhan, the city where the disease first emerged.

On Monday the U.S. Treasury Department said it expects to borrow $673 billion in the third quarter, which is $148 billion lower than previously estimated. The decline was driven, in part, by lower outlays than expected. The updated forecast includes an end-of-quarter cash balance of $750 billion.

In data, U.S. factory orders climbed 1.5% in June, even as firms struggled with shortages.

What are analysts saying?

The new wave of the coronavirus “has not only brought into question the timing of next steps toward returning to normal, it’s also raised concerns that this might be the new normal,” BMO Capital Markets strategists Ian Lyngen and Ben Jeffery wrote in a note.

“The pandemic-related supply chain disruptions that have triggered the series of higher-than-expected increases in consumer prices have thus far been dismissed as transitory and as such not necessitated a monetary policy response,” they said. “However, should the delta variant keep workers sidelined for even longer, wage gains will prove durable (particularly in the front-line service sector) and reinforce the upside already seen in the inflation complex. This would present a challenge to the Fed’s new framework as the employment goals will be far from realized even as inflation appears to be of a more organic nature.”

Read: New coronavirus wave is giving credence to the risks of a U.S. stagflation-like scenario

“The question is whether the bond market is sensing something sinister ahead or whether the latest moves can be explained away as technical. There are solid arguments on both sides,” said Marios Hadjikyriacos, senior investment analyst at XM, in a note.

The spread of the delta variant is adding to jitters about peak growth, but aggressive central bank buying of bonds is also a factor as some players, including banks, are forced to buy “truckloads of Treasurys” as top-tier collateral, he said.

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