U.S. Treasury Yields Extend Steep Decline

Yields on U.S. government bonds reached fresh multimonth lows on Wednesday, reflecting investors’ anxiety about the economic outlook and new concerns about the highly contagious Delta variant of Covid-19.

Yields, which fall when bond prices rise, climbed sharply in the first quarter of 2021 but have been dragged down in recent months by investors reassessing their more optimistic economic forecasts amid signs that Congress and the Federal Reserve might not provide quite as much stimulus as previously anticipated.

Underwhelming economic data has added to those concerns, along with new data from Israel suggesting Pfizer Inc . ’s vaccine is less effective at protecting against infections caused by the Delta variant.

Treasury yields play an important function in the economy, helping set borrowing costs on everything from mortgages to corporate bonds. They are also a closely watched economic barometer, with longer-term yields in particular tending to rise when the growth outlook improves and decline when it falters.

On Wednesday, yields dropped steeply near the start of U.S. trading, then remained lower on the day after the Federal Reserve released minutes from its June 15-16 policy meeting. Those revealed a debate among officials about how and when they might start scaling back the central bank’s support for the economy.

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