Bond Report: Most Treasury yields turn lower after disappointing data on U.S. sentiment

Most Treasury yields turned lower Friday morning, after the headline reading from the University of Michigan’s consumer-sentiment report came in at the lowest in a decade.

What are yields doing?

The 10-year Treasury note yields

1.540%, down from 1.558% on Wednesday at 3 p.m. Eastern Time.

The 2-year Treasury note rate

was at 0.495%, compared with 0.503%.

The 30-year Treasury bond

yields 1.929%, edging slightly higher from 1.917% on Wednesday.

What’s driving the market?

In data released Friday, the University of Michigan’s consumer-sentiment indexfell to 66.8 in November from 71.7 in previous month, producing a headline figure that is the lowest since 2011. Meanwhile, job openings were little changed at 10.4 million in September.

The disappointing sentiment reading comes amid evidence of a persistent rise in U.S. inflation and worries that the Federal Reserve will need to act faster to tackle pricing pressures, which remained Treasury market’s focus on Friday.

The October headline consumer-price index came in at a nearly 31-year high, with the pace of inflation over the past year rising to 6.2% in October from 5.4% in the prior month. That is more than double the Federal Reserve’s 2% target.

The Fed also announced last week its plan to reduce monthly purchases of Treasurys and mortgage-backed securities, as expected, which started last year to help prop up the hobbled U.S. economy during the pandemic.

What strategists are saying

“Inflation could remain elevated in the coming months, and each inflation release that comes in above expectations has the potential to cause volatility in rate and equity markets,” said Mark Haefele, chief investment officer at UBS Global Wealth Management.

“The Treasury market remains under pressure as the implications from the stronger-than-expected October inflation report continue to reverberate,” BMO Capital Markets strategists Ian Lyngen and Ben Jeffery wrote in a note. Many observations are “that the upward pressure on inflation has now become so broad-based as to warrant the FOMC throwing in the proverbial towel and conceding that inflation isn’t going to simply dissipate without a greater policy response.”

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