The yield on 10-year Treasury notes traded around 1.45%, hovering around a 3-week low of 1.4393% touched on November 9th, as investors balanced concerns over the emergence of a new coronavirus variant with prospects of a faster tapering by the US Federal Reserve. Fed Chief Powell said the central bank will discuss whether to reduce their bond purchases faster than previously anticipated at its next meeting and the word "transitory" is no longer the most accurate term to describe current inflation.
The yield on UK 10-year government bond held above 0.8% in early December, having touched its lowest level since mid-September. In the UK, however, doubts arose on whether the Bank of England will raise interest rates at its December meeting.
The yield on the benchmark Japan 10-year JGB sank below 0.06%, close to levels not seen since October 5th .Traders fear the battle against COVID-19 could get much more difficult because this strain exhibits several mutations in the spike protein targeted by existing vaccines. Moderna’s CEO said to the Financial Times that current vaccines could see a significant drop in effectiveness and that it will take months to reformulate a new shot and distribute it across the world. Capping some of the downturn, local media reported that the Japanese government draft budget for FY2022 will likely exceed a record USD 946 billion due to defense and social welfare expenses.
The yield on Australian 10-year government bonds slid below 1.70%, a level not seen since October 16th. The new strain carries several mutations that could reduce the efficacy of vaccines and is already present in several countries, including Australia. Prime Minister Scott Morrison said the nation would delay plans to reopen borders to skilled workers and international students by two weeks, while several Australian states are rolling out interstate travel restrictions. Furthermore, analysts expect the Reserve Bank of Australia to leave monetary policy unchanged and reinforce that there won't be rate hikes before 2023 at its next interest rate decision later this month.
Germany's benchmark Bund yield hovered at -0.34%, the lowest in near twelve weeks as concerns over the spread of the Omicron coronavirus variant outweighed expectations of a quicker tapering by the US Federal Reserve. In Europe, money market participants no longer expect an increase in the ECB deposit rate in 2022 even though the Eurozone inflation rate has risen to near all-time high in November.
The yield on the 10-year government bonds in India stood at 6.35%, after moving close to 6.39% in the beginning of the month, as investors dump riskier equity assets and move to safe haven bond assets amid concerns of new Omicron variant. Investors turned cautious as WHO declared Omicron as “risky” and Moderna CEO cited that current vaccines would struggle with the new variant. Meanwhile, earlier in the month, the country’s central bank announced opening of the USD 1.1 trillion sovereign bond market to retail investors through Prime Minister’s “RBI Retail Direct Scheme” while it suspended bond buying under its “Government Securities Acquisition Programme” last month.
The yield on the benchmark China 10-year government bond sank further towards 2.85%, the lowest since September 6th and continues to approach levels not seen since June of last year, amid reports of huge liquidity injections by the People’s Bank of China (PBOC) and growing concerns about the economic recovery. The central bank has been injecting tranches of CNY 100 billion worth of reverse repos into the economy, aiming to keep liquidity loose in an effort to help boost the recovery despite inflationary pressures. At the same time, Premier Li Keqiang said that the economy was facing increasing headwinds and has urged local governments to support small businesses amid warnings from several government advisers that the economic recovery is not yet stable and growth in the final quarter might miss the key threshold of 4%. The nation has been battling its biggest delta variant outbreak yet, while sticking to the “Zero Covid Policy.