Treasury yields rose on Friday, with the two-year yield rising to its highest level since 2007 as Federal Reserve officials suggested the central bank would likely hike its benchmark rate by another 75 basis points at its meeting later this month.
What yields are doing
- The yield on the 2-year Treasury note
TMUBMUSD02Y,
3.560%
rose 8 basis points to 3.569%, its highest level since Nov. 7 2007. - The 10-year Treasury note yield
TMUBMUSD10Y,
3.314%
rose 3 basis points to 3.321% Thursday afternoon. - The yield on the 30-year Treasury bond
TMUBMUSD30Y,
3.449%
rose 1.5 basis points to 3.428% versus 3.456% late Thursday.
What’s driving the market
Investors remain focused on the outlook for interest rates, with the Federal Reserve underlining its intention to aggressively tightening monetary policy until it gets inflation back under control. Treasury yields rose sharply this week, with the two-year rising 17.1 basis points, its biggest weekly increase since Aug. 5.
The inverted yield curve narrowed even further, with the spread between the two-year and 10-year yields returning to levels last seen one month ago as bond traders price in higher odds of another 75 basis point rate hike — what would be the Fed’s third such hike in a row — when the Federal Open Markets Committee holds its next two-day policy meeting beginning Sept. 20.
“The market is pricing in Fed remarks suggesting the 75 basis point hike is likely,” said Gennadiy Goldberg, a rates strategist at TD Securities. “We think the curve will stay inverted for quite some time as the Fed continues to talk up rate hikes and the market prices higher odds of the economy slowing.”
The key Fed speakers included St. Louis Fed President Jim Bullard, who again said he would likely support a 75 basis point rate hike later this month, and Fed Governor Christopher Waller, who said the Fed funds rate — a key benchmark interest rate for the U.S. financial system — may need to rise “well above 4%” if inflation doesn’t come down. Their comments are the latest investors will hear from the Fed officials until the Sept. 20-21 policy meeting as the pre-meeting media “blackout period” begins Friday night.
Looking ahead, investors will receive a raft of data on inflation and inflation expectations, including the consumer-price index for August, next week.
Source: https://www.marketwatch.com/story/treasury-yields-slip-as-investors-await-next-weeks-u-s-cpi-reading-11662731341?siteid=yhoof2&yptr=yahoo