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Treasury yields were headed sharply lower in thin trading on Black Friday, as investors piled into government debt in a flight to safety sparked by fears of a fast-spreading variant of COVID-19.

Fixed-income markets will close at 2 p.m. Eastern Time, an hour earlier than usual, after being closed on Thursday for the Thanksgiving holiday in the U.S.

What are yields doing?
  • The 10-year Treasury note yield TMUBMUSD10Y, 1.538% was at 1.519%, down from 1.644% on Wednesday at 3 p.m. ET. Yields for Treasurys fall as prices rise.
  • The 2-year Treasury note TMUBMUSD02Y, 0.543% yields 0.512%, off 13.2 basis points from 0.644% late Wednesday.
  • The 30-year Treasury bond rate TMUBMUSD30Y, 1.886% was at 1.874%, down 9.5 basis points from 1.969% on Wednesday.
  • For the week, the 10-year was down 1.6 basis point, the 2-year note was up 0.9 basis point, while the 30-year bond has down 3.2 basis points from last Friday’s 3 p.m. ET finish.
What’s driving the market?

A new strain of COVID-19 — known as B.1.1.529 — that has been identified in parts of southern Africa, Hong Kong and Israel, was being assessed by the World Health Organization. which was meeting in Geneva to decide whether to declare it a variant of concern, similar to the term used to describe the delta variant of the deadly illness.

The news has raised concerns about global economic recovery, with a number of countries announcing travel restrictions from parts of the world where the novel strain of COVID-19 has been identified.

The British government announced that it was banning flights from South Africa and five other southern African countries effective at noon (1200GMT) on Friday, and that anyone who had recently arrived from those countries would be asked to take a coronavirus test

The move lower for Treasury yields has come as yields, particularly among shorter-dated maturities, had been mostly headed higher on expectations that Federal Reserve Chairman Jerome Powell, who was renominated for a second term by President Joe Biden on Monday, has a new mandate to accelerate the pace of the Fed’s reduction of monthly asset purchases, with an eye toward curbing a surge in inflation and eventually lifting interest rates.

In an interview with Yahoo Finance published on Wednesday, San Francisco Fed President Mary Daly said that a case can be made for speeding up the central bank’s tapering in December.

The flight to havens, however, was driving up the prices of Treasurys, and pushing rates decidedly lower. COVID fears were set to drag U.S. stock benchmarks, the Dow Jones Industrial Average DJIA, -0.03% and the S&P 500 index SPX, +0.23%, substantially lower.

What analysts are saying
  • Neil Shearing, group chief economist at Capital Economics on Friday said that the global economic backdrop is very different as the new variant emerges, compared with the emergence of delta. “Supply chains are already stretched. A virus-related surge in goods spending, or port closures, would exacerbate existing supply strains and add upward pressure to goods inflation,” he wrote in a Friday note. “Likewise, a new, more dangerous, virus wave could cause some workers to temporarily exit the workforce, and deter others from returning, making current labor shortages worse.”

Source: This post first appeared on http://marketwatch.com/

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