Treasury yields reversed their downward trend modestly in August with the 10-year Treasury note rising 4 basis points (bps) to end the month at 1.29%. Overall, yields experienced big swings intra-month as market participants responded to mixed economic data, Fed commentary around tapering of bond purchases, Treasury bond supply, and the prospects of the Delta variant stalling the economic recovery. 

Looking forward, while the prospects of a taper tantrum are relatively low, there has been a substantial amount of de-risking over the last two months due to downward revisions to growth comig from the spread of the Delta variant, indicating an upward bias to yields in coming months. 

Investor positioning data continues to show that most market participants remain underweight duration and expect better labor market data, alongside further progress toward passing an infrastructure package, as catalysts for higher yields. The expectaion for a tapering of purchases may be offset by reduced issuance.