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U.S. Treasury yields turned mixed in Tuesday trading, a day after an aggressive and broad-based selloff in government debt to kick off the new year sent the rate on the 2-year note to a 22-month high.

What are yields doing?
  • The yield on the 10-year Treasury note TMUBMUSD10Y, 1.677% was at 1.673%, compared with 1.628% at 3 p.m. Eastern on Monday. Yields and debt prices move opposite each other.
  • The 2-year Treasury note TMUBMUSD02Y, 0.769% yielded 0.762%, down from 0.784% Monday afternoon.
  • The yield on the 30-year Treasury bond TMUBMUSD30Y, 2.083% was at 2.082% versus 2.016% late Monday.
  • On Monday, the 2-year yield rose to its highest since March 2, 2020, based on 3 p.m. levels, according to Dow Jones Market Data. Meanwhile, the 10-year climbed to its highest since Nov. 24 and the 30-year advanced to the highest since Nov. 23.
What’s driving the market?

Investors appeared to wave off concerns over the omicron variant of the coronavirus that causes COVID-19, with the Dow Jones Industrial Average DJIA pushing further into record territory Tuesday, though tech shares were dragged down by the rise in long-term yields. Treasury prices fell on maturities from 7 to 30 years out, while investor demand for 1- to 3-year government debt pushed those rates lower.

COVID-19 infections have surged, with the U.S. registering 1,083,948 cases on Monday, according to data collected by Johns Hopkins University—more than double the previous record of 486,428 set four days ago.

Hospitalizations for confirmed or suspected COVID-19 cases hit a seven-day average of 97,855 on Monday, according to data from the U.S. Department of Health & Human Services cited by The Wall Street Journal. That is up 41% over the past two weeks but below the pandemic peak of 137,510 seen on Jan. 10, 2021, and a smaller peak of 102,967 seen on Sept. 4, 2021, amid the surge in the delta variant of the coronavirus.

Investors continue to look for the Federal Reserve to begin lifting rates as early as this spring, with traders pricing in a 61% chance of a rate move in March, when the central bank is expected to end its monthly asset purchases.

Data released Tuesday included the Institute for Supply Management’s gauge of manufacturing, which dropped to 58.7% in December from 61.1% in November, as U.S. manufacturers coped with persistent shortages. Economists polled by The Wall Street Journal had forecast the index to slip to 60%. Readings above 60% are considered exceptional and any number above 50% signals expansion.

A record 4.5 million Americans quit their jobs in November and job openings fell by 529,000 to 10.6 million on the last day of that month, the Labor Department said Tuesday.

Meanwhile, Minneapolis Fed President Neel Kashkari acknowledged that inflation has risen higher and lasted longer than he expected. In a separate essay released on his regional bank’s website, he said he penciled in two rate-hikes in 2022 at the December FOMC meeting.

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What are analysts saying?

“After a somewhat turbulent end to 2021, most ‘risky’ assets have started the new year on the front foot and ‘safe’ government bond yields have risen sharply,” said Jonas Goltermann, a senior markets economist for Capital Economics. “Provided that concerns about the pandemic continue to fade, we expect equity markets to continue to rise, albeit more gradually than last year, and bond yields to rise further in the coming months.”

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