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The yield on the benchmark 10-year Treasury note eased to 1.45%, as investors digested economic data and continued to monitor updates about the omicron coronavirus strain. The US economy expanded an annualized 2.3% in Q3 over the prior period, slightly faster than a prior estimate of 2.1% but much slower than a 6.7% hike in Q2. It was the softest rate of growth since the economy slumped in the June quarter of 2020, as infections resurged in the second half of this past summer. On the pandemic front, Omicron is now the dominant variant in the US and makes up 73.2% of recent cases, with the rate of daily infections now having doubled from a 3-month low hit in late October. In addition, Goldman Sachs lowered US 2022 economic growth as US Senator Joe Manchin said he would not support President Biden's $1.9 trillion Build Back Better Act.

The yield on UK 10-year government bond rose to 0.8%, moving away from an over three-month low of 0.7% hit on December 13th, as investors cheered Britain’s decision to wait for more data on hospitalizations and deaths before announcing any further measures to curb the spread of the Covid-19 virus. Still, UK Prime Minister Boris Johnson warned that further lockdown measures may be needed as hospitalizations in London rose for the third week. In addition, several countries have announced restrictions for travelers arriving from the UK. Last week, the Bank of England surprised markets by hiking interest rates for the first time since the pandemic hit the economy back in March 2020 citing mounting inflationary pressures.

The yield on the benchmark Japan 10-year JGB rebounded sharply to a three-week high of 0.06%, in line with global peers, as a recovery in domestic equities dented demand for safe-haven debt. Meanwhile, the Japanese government upgraded its economic assessment for the first time in seventeen months, as authorities raised their views on private consumption and business conditions amid falling coronavirus infections domestically and easing social distancing rules, despite downside risks from lingering supply issues and raw material price inflation. On December 17th, the Bank of Japan decided to begin tapering corporate debt purchases to pre-pandemic levels and partially unwind its emergency funding scheme from March 2022 onwards.

The yield on Australian 10-year government bonds bounced back to 1.62% in the third week of December, amid a broad rise in global bond yields, as concerns about the omicron strain calmed and traders digested minutes from the Reserve Bank of Australia’s December 7th meeting. Members of the Board of the RBA noted the economy was rapidly recovering from the delta-induced contraction in Q3 and the omicron variant was not expected to derail the recovery.

Germany's benchmark Bund yield rose to -0.34% in the third week of December, remaining well above a 13-week low of -0.387% touched earlier in the month as risk appetite returned to markets and equity indexes recovered while investors assess how the Omicron coronavirus variant will impact the global economy. Germany renewed restrictions in the country amid a fourth wave, and the Netherlands entered a lockdown. On the data front, Germany’s GfK Consumer Confidence gauge for January 2022 fell more than expected to a seven-month low of -6.8. Meanwhile, ECB policymaker Peter Kazimir said inflation in the bloc could stay elevated for even longer than the ECB anticipates. Last week, the ECB announced a reduction in the pace of its asset purchases but pledged further stimulus avoiding any discussion about the possibility of future rate hikes.

India 10 Year Government Bond Yeld increased to a 20-month high of 6.46%, the highest since April of 2020, following hawkish monetary policy decisions by the Bank of England and the US Federal Reserve as they warned of surging inflation. At the same time, on the domestic front, signs of slowing growth, rising cases of the Omicron variant and a higher than expected rise in retail prices drove up the yield.

China 10 Year Government Bond Yield decreased to an 18-month low of 2.818% following the People’s Bank of China’s decision earlier this week to cut its one-year benchmark loan rate by 5bps, the first-rate cut in 20 months amid the downward pressure in the Chinese economic recovery.

The yield on the French 10-year OAT rose to 0.08% in the fourth week of December, the highest in four weeks, as French policymakers tightened restrictions on unvaccinated individuals after interrupting travel from the UK in an attempt to prevent the need for lockdowns ahead of the holidays. At the same time, the government extended its pandemic support scheme to help businesses worst hit by the pandemic, capped at EUR 12 million.

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