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Treasury yields jumped early Wednesday as investors awaited minutes of the Federal Reserve’s March policy meeting, which is expected to offer details on plans to begin unwinding the central bank’s nearly $9 trillion balance sheet.
What are yields doing?
-
The yield on the 10-year Treasury note
TMUBMUSD10Y,
2.642%
was 2.647%, compared with 2.554% at 3 p.m. Eastern on Tuesday, which was its highest since April 23, 2019. -
The 2-year Treasury note yield
TMUBMUSD02Y,
2.559%
stood at 2.567%, compared with 2.502% Tuesday afternoon, which was its highest since March 6, 2019. -
The yield on the 30-year Treasury bond
TMUBMUSD30Y,
2.659%
was 2.666% versus 2.582% late Tuesday.
What’s driving the market?
The 2 p.m. release of the minutes from the Fed’s March policy meeting remain highly anticipated, with investors eager for clues to the path of monetary tightening, particularly plans for shrinking the central bank’s nearly $9 trillion balance sheet.
Remarks by Fed Gov. Lael Brainard that reinforced expectations for the Fed to move quickly in reducing the balance sheet sent yields jumping, particularly at the long end of the yield curve. Brainard said the central bank will “continue tightening monetary policy methodically through a series of interest rate increases and by starting to reduce the balance sheet at a rapid pace as soon as our May meeting.”
The rise in yields, which saw the 10-year move back above the 2-year on Tuesday and undo an inversion of that closely watched part of the yield curve, was blamed for sinking tech shares and other so-called growth stocks on Tuesday. Stock-index futures were pointing to a lower start for U.S. equities on Wednesday.
See: Stock market in for ‘rough ride’ after ‘tough talk’ on Fed balance sheet, says economist
Investors continue to monitor developments in Ukraine. The U.S., along with other Group of Seven countries and the European Union were set Wednesday to announce new sanctions on Russia over its invasion of Ukraine, after evidence of alleged war crimes emerged as Russian forces pulled back from the area around Kyiv.
What are analysts saying?
“Brainard’s comments likely put more emphasis on the theme of quantitative tightening ahead of [the] release of the March Federal Open Market Committee (FOMC) minutes, where indications of wide consensus within the committee to shrink the balance sheet at a fast pace could keep bonds vulnerable and support the dollar,” wrote strategists Francesco Pesole and Chris Turner, in a note.
