U.S. Treasury yields fell sharply on Friday morning, amid concerns around a new variant of the coronavirus found in South Africa.
The yield on the benchmark 10-year Treasury note dropped by more than 11 basis points to 1.5277% at 4 a.m. ET. The yield on the 30-year Treasury bond fell 9 basis points to 1.8791%. Yields move inversely to prices and 1 basis point is equal to 0.01%.
Yields slid lower on Friday, as investor fled to the safety of bonds, with stock market futures also falling.
Overnight, fears of a new Covid variant found in South Africa started to rise, seeing the U.K. suspend flights from six African countries. More than 30 mutations have been detected in the new variant, raising concern that it could possibly better evade the antibody protection created by vaccines and prior infections.
The 10-year Treasury yield had risen earlier in the week, hitting 1.68% as investors digested the news that Jerome Powell had been renominated as Federal Reserve chair.
Yields then eased back, despite minutes from the latest Fed policy meeting which showed that central bank officials would be prepared to raise interest rates sooner than expected should inflation rise too much.
Geoffrey Yu, senior market strategist at BNY Mellon, told CNBC’s “Squawk Box Europe” on Friday that some corners of the market might believe that the news of this new variant would give the Fed reason to pause on its normalization of monetary policy, though he didn’t necessarily agree with that view.
Yu said that the recent resurgence of Covid cases in Europe, even before the news of this latest variant emerged, showed that ” we are still going to be dealing with this for some time, and there will be rounds of risk aversions that will hit markets, due to concerns over the pandemic.”
Meanwhile, weekly U.S. jobless claims released Wednesday came in at their lowest point in 52 years. The latest personal consumption expenditure index, which is the Fed’s preferred inflation measure, rose 4.1% year-on-year in October, matching expectations.
The bond market was closed on Thursday for Thanksgiving and there are no economic data releases or Treasury auctions slated for Friday, with markets closing early for the holiday weekend.
— CNBC’s Jesse Pound contributed to this market report.
