July 2021 Market Review

Treasury yields continued their downward trend in July with the 10-year maturity experiencing the largest drop of -25 basis points (bps). The Delta variant remains a near-term headwind as the daily pace of new Covid cases in the U.S. continues to march higher. The CDC has reversed its earlier guidance, now urging both unvaccinated and vaccinated individuals to wear masks indoors in areas with high infection rates. 

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. 

Looking forward to August and the U.S. Treasury refunding announcement, we expect coupon issuance sizes to remain unchanged. The TBAC (Treasury Borrowing Advisory Committee) is expected to provide some insight into issuance later this year when there is more clarity surrounding infrastructure spending. 

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