Treasury yields rise as Omicron economic concerns fade

The yield on the 10-year Treasury note has made a round trip since we first learned about the Omicron variant.

Why it matters: Trading in the 10-year note provides a decent thumbnail sketch of the financial hivemind's expectations for economic growth and inflation over the next decade. It's telling us that Omicron's economic disruption, like its health impact, looks fairly mild.

• A similar dynamic occurred during previous pandemic episodes, like Delta, where yields rose to pre-episode levels as fears over the virus's impact on the economy eased.

The yield, which rises as investors sell safe-haven government bonds and take a bit more risk, briefly touched 1.71% in afternoon trading yesterday, a tad higher than its level in late November.

• Investors, like the rest of humanity, have learned to live with the virus, as successive waves — from the initial COVID shock to Delta, and now Omicron — are making less and less of an impact on the economy and the markets.

Reality check: The bond market isn't predicting gangbusters growth. While rising, long-term yields are still quite low by historical standards.

The bottom line: Investors expect the strong rebound from the worst of the pandemic — the U.S. is thought to have grown about 5.5% last year — will peter out, with the U.S. sinking back to the kind of slow-growth, low-inflation economy that prevailed in the dozen years before the pandemic hit.