Treasuries Get a Lift on Vaccine News

Vaccine Could Aid Economy

The FDA’s full approval of the Pfizer (PFE) BioNTech (BNTX) vaccine boosted US Treasury yields Tuesday, with the 10-year Treasury note and 30-year Treasury note each rising 2 basis points. Now that the FDA has given full clearance to the COVID-19 shot, expectations are running high that millions more Americans will get vaccinated, boosting the economic recovery.

With the Delta variant spreading rapidly throughout the country, signs have been emerging that consumers are reining in spending and becoming more cautious about venturing out, which is putting the strong economic recovery in the US at risk. With that said, vaccine approval may mean that more companies, schools, and institutions can mandate the shot.

Fed Meeting This Week

The timing of the FDA approval also comes as the Federal Reserve is gearing up for its annual Jackson Hole symposium which kicks off Thursday. This year’s summit, in which central bankers from across the globe meet to discuss monetary policy, is being held virtually. Whether or not the Fed will begin to taper back its bond-buying program will be a topic on the agenda.

On Friday Fed Chairman Jerome Powell will provide comments following the completion of the meeting. Investors will be looking for any signs the US will begin to rein in its massive bond-buying program. Next week the Fed is slated to spend $40 billion on 67-day notes and $60 billion on two-year notes.

New Home Sales Rebound

US Treasuries may have also been impacted by the July new home sales report which showed an uptick for the first time in four months. On an annualized basis, purchases of new single-family homes increased 1% to 708,000, partly thanks to additional inventory and robust demand.

Historically low mortgage rates, a demand for more space as a result of the pandemic, and lackluster inventory has led to a surge in purchases over the past year. Builders have struggled to keep up with demand as they contend with rising costs of materials and labor shortages. As a result, homes are getting more expensive, locking out many first-time buyers. The report also showed that the median sales price of a new home jumped to a record $390,500, which is 18.4% higher than this time last year.

In addition to rising Treasury rates and a somewhat normalizing real estate report, the US dollar held steady on Tuesday. The combination of economic movement and market reaction signaled that investors appear less concerned about the spread of the Delta variant this week. Wall Street is now patiently waiting for the Jackson Hole symposium and any comments that could impact portfolio positions heading into the end of a unique year.

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