Bond exchange traded funds strengthened on Tuesday as concerns over the COVID-19 Omicron variant fueled the risk-off selling and investors headed toward safe havens.
Traders turned away from risk assets toward safer bets after Moderna’s CEO warned of the risks involved with a spreading Omicron variant.
“There is no world, I think, where (the effectiveness) is the same level,” Moderna’s chief executive, Stephane Bancel, told the Financial Times in an interview.
“I think it’s going to be a material drop. I just don’t know how much because we need to wait for the data. But all the scientists I’ve talked to … are like ‘this is not going to be good,'” Bancel added.
While drug makers are already working on ways to adapt vaccines to the new variant, the reworked designs will take months to finalize and begin shipping.
“It’s not good news, and it’s coming from someone who should know,” Commonwealth Bank of Australia currency strategist Joe Capurso, told Reuters. “Markets have reacted in exactly the way you’d expect them to.”
Exacerbating losses in the equity markets, Federal Reserve Chairman Jerome Powell told Congress that inflation will remain elevated until the middle of next year, which will force the central bank to “likely” speed up tapering of its asset-purchasing program that has supported the economic rebound off the pandemic-induced recession.
“We’ve long maintained that the Fed is the ultimate owner of the ‘transitory’ characterization and the chair’s decision to move beyond that is a decidedly hawkish step,” Ian Lyngen, head of U.S. rates strategy at BMO Capital Markets, told Reuters.
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