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Treasury yields edge lower with omicron, Fed meeting in focus

U.S. Treasury yields fell on Monday morning as investors focused on developments around the omicron variant and the Federal Reserve’s December policy meeting.

The yield on the benchmark 10-year Treasury note dipped 1 basis point to 1.4735% at 5 a.m. ET. The yield on the 30-year Treasury bond gave up 2 basis points at 1.8627%. Yields move inversely to prices and 1 basis point is equal to 0.01%.

Investors continue to monitor for updates on the highly mutated omicron Covid variant. Markets bounced back last week from a sell-off triggered by fears over the variant, with the S&P 500 notching its best week since February.

Sentiment was lifted by news from Pfizer and BioNTech that a study found three doses of their vaccine provide a high level of protection against the variant.

As at Sunday, the U.S. was approaching 800,000 coronavirus-related deaths. The new variant has pushed some government officials to reinstate health restrictions to slow the spread.

Investors also continued to digest Friday’s hotter inflation report, which came in at 6.8% in November year-over-year for the biggest surge since 1982. The print was slightly higher than the 6.7% Dow Jones estimate.

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No major economic data releases are due out on Monday.

Investor focus will likely be on the Fed’s latest two-day policy meeting, which kicks off on Tuesday. After the meeting wraps up on Wednesday, the Fed is expected to announce that it will speed up the pace of tapering its asset purchasing program.

Julian Howard, investment director of multi-asset solutions at GAM, told CNBC’s “Squawk Box Europe” on Monday that despite the Fed’s discussion of speeding up tapering, he believed there was a lot of “pre-emptive and premature noise” around raising interest rates.

“I still see inflation as transitory, even as the Fed has dropped the wording from its statements,” he said.

Auctions are due to be held on Monday for $57 billion of 13-week bills and $51 billion of 26-week bills.

CNBC’s Yun Li contributed to this market report.

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