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Treasury yields edged higher Thursday, with the 10-year note yield hovering just below a two-year high set earlier this week.
What are yields doing?
-
The 10-year Treasury note yield
TMUBMUSD10Y,
1.831%
stood at 1.832%, compared with 1.826% at 3 p.m. Eastern on Wednesday. -
The 2-year Treasury note yield
TMUBMUSD02Y,
1.035%
was at 1.031% versus 1.022% on Wednesday afternoon. -
The yield on the 30-year Treasury bond
TMUBMUSD30Y,
2.152%
was 2.145%, compared with 2.137% on Wednesday. - The yields on the 10-year note and the 30-year bond saw their largest one-day drops since Dec. 13 on Wednesday. On Tuesday, the 10-year on Tuesday ended at its highest since January 2020, based on 3 p.m. Eastern levels, while the 2-year finished at its highest since February.
What’s driving the market?
The selloff that’s driven Treasury yields higher in the new year took a breather on Wednesday. Expectations the Federal Reserve will be much more aggressive in raising interest rates and otherwise tightening monetary policy in an effort to fight persistently high inflation have been cited as the main driver.
The Fed, which will hold its first policy meeting of 2022 next week, is expected to lay the groundwork for delivering a rate increase at its following meeting in March, with some investors even penciling in the prospect of a half percentage point rise in the fed-funds rate rather than a quarter-point increase.
Read: Fed to use upcoming policy meeting to get ducks in a row for March liftoff
China on Thursday cut its benchmark lending rates for a second straight month. The move was widely expected after the central bank lowered the borrowing costs on medium-term loans earlier this week, as it attempts to support a slowing economy.
Weekly U.S. data on jobless claims is due at 8:30 a.m. Eastern. First-time applications for unemployment benefits are expected to have fallen to 225,000 in the week ended Jan. 15 from 230,000 a week earlier, according to economists surveyed by The Wall Street Journal.
The Philadelphia Fed’s January manufacturing index is also due at 8:30 a.m., while figures on December existing home sales are set for release at 10 a.m.
The Treasury Department will auction $16 billion in 10-year Treasury inflation-protected securities, or TIPS, on Thursday afternoon.
What are analysts saying?
“In the U.S., four rate hikes are currently priced in with roughly a 20% chance of a fifth. A 50 [basis point[ hike at the March meeting is not priced in,” wrote analysts at UniCredit Bank, in a Thursday note. “While this is certainly quick, it is certainly not excessive given the many vocal voices urging the Fed to move faster. We therefore see further room on the upside until upcoming inflation data are released or the [Fed] press conference next Wednesday gives some more precise hints. The outlook for USTs (U.S. Treasurys) is therefore still vulnerable over the next couple of days.”
