Bond Report: 10-year Treasury yield pops above 0.90% to reach March high on positive BioNTech, Pfizer vaccine news

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U.S. Treasury yields surged Monday after BioNTech and Pfizer said their COVID-19 vaccine candidate was 90% effective in a late-stage clinical trial, bolstering expectations that the U.S. economic activity could return to normal next year.

What are Treasurys doing?

The 10-year Treasury note yield TMUBMUSD10Y, 0.934% jumped 13.6 basis points to an eight-month high of 0.957%, its biggest daily increase since March 19, while the 2-year note rate TMUBMUSD02Y, 0.176% was up 3 basis points to 0.183%, rising to its highest since June. The 30-year bond yield TMUBMUSD30Y, 1.717% surged 15.1 basis points to an eight-month high of 1.750%.

What’s driving Treasurys?

The bond market came under heavy selling pressure after the positive vaccine development spurred expectations that the U.S. economy could see a swifter rebound than expected, even as the tally of infections in America topped 10 million on Monday.

Pfizer and BioNTech said their COVID-19 vaccine candidate achieved “success” in the first interim analysis of a Phase 3, or late-stage study.

See: BioNTech, Pfizer stocks soar after COVID-19 vaccine candidate achieves ‘success’ in first analysis

Many weren’t prepared for a 90% effective vaccine candidate. Dr. Anthony Fauci, director of National Institute of Allergy and Infectious Diseases, had warned a vaccine may be no more than 60% effective.

Still, scientists caution that actual results will need to be reported and the 90% efficacy number could change as the trial progresses. On top of that, it is not clear how long immunity from the deadly virus lasts, even if the vaccine is effective.

Meanwhile, the Treasury Department auctioned off $54 billion of 3-year notes in the afternoon.

What did market participants say?

“We should be careful over-interpreting a very, very large move in a single day. But fundamentally, concrete news on a vaccine is great news for the economy, ergo bad news for bonds,” said Tom Graff, head of fixed income for Brown Advisory, in an interview.

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