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U.S. Treasury yields edged up Thursday, following the 10-year Treasury’s biggest yield drop in almost week during the prior session, as a gauge of U.S. inflation jumped in November and weekly jobless benefit claims came in unchanged at 205,000.
The bond market will close an hour earlier Thursday and remain closed on Friday in observance of the Christmas holiday.
What are yields doing?
-
The 10-year Treasury note yields
TMUBMUSD10Y,
1.500%
1.488%, up from 1.457% at 3 p.m. Eastern on Wednesday. -
The 30-year Treasury bond rate
TMUBMUSD30Y,
1.911%
was at 1.890%, rising from 1.856% a day ago. -
The 2-year Treasury note yield
TMUBMUSD02Y,
0.687%
was at 0.683%, compared with 0.665% on Wednesday afternoon. - For the week, the 10-year Treasury note has climbed 8.7 basis points, the 30-year bond has risen 8.1 basis points over the week, while the 2-year note has climbed 3.5 basis points, versus their 3 p.m. levels last Friday.
What’s driving the market?
Data released on Thursday shows that the Federal Reserve’s preferred inflation gauge, the 12-month increase in the PCE index, jumped to 5.7% in November from 5% in the prior month. That’s the highest rate since 1982.
Meanwhile, initial jobless benefit claims for the week ended Dec. 18 were unchanged at 205,000 — below the pre-pandemic average and economists’ estimate for 206,000. Jobless claims continued to reflect a tight labor market and robust demand for workers as the economy recovers from the pandemic.
Consumer spending rose 0.6% in November after a 1.4% gain in the prior month, the U.S. government said Thursday. That’s in line with forecasts of economists surveyed by The Wall Street Journal. And durable goods increased 2.5% in November, beating economists’ forecast for a 1.5% gain.
In other data released on Thursday, new-home sales jumped 12.4% to a 744,000 annual rate in November and the final University of Michigan consumer sentiment index edged up to 70.6 in December from a 70.4 preliminary reading.
Equity markets have been rising after a series of new studies suggested the omicron variant may be less severe than its predecessors. Preliminary data from a trio of studies also showed that omicron is less likely to lead to hospitalization, suggesting the variant is comparatively less dangerous than the earlier delta variant. In other positive news, the Food and Drug Administration authorized a COVID-19 antiviral pill from Pfizer Inc. PFE on Wednesday.
However, the rapid spread of the new variant means that hospitals may still be overwhelmed. Governments continue to take measures to slow the spread, with Chinese authorities locking down a city of 13 million people Thursday and mask mandates are being enforced in many countries, along with some curfews on entertainment venues ahead of the year-end holidays.
The World Health Organization is warning that without COVID vaccinations for poorer countries, the world will continue to struggle with the pandemic despite booster vaccines in rich countries.
What are strategists saying?
BofA economists and strategists predict 2022 global gross domestic product growth of 4.3%, U.S. GDP growth of 4.0%, China GDP growth of 4.0%, euro area GDP growth of 3.6%, with the 10-year Treasury yield up to 2% by the end of next year, according to a recent report.
