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Treasury prices rose Thursday, pulling down yields ahead of data on a closely watched measure of U.S. inflation for February and as oil prices fell sharply, with traders prepared to ring the bell on what’s been a brutal quarter for government debt.
What are yields doing?
-
The yield on the 10-year Treasury note
TMUBMUSD10Y,
2.321%
was 2.319%, compared with 2.357% at 3 p.m. Eastern on Wednesday -
The 2-year Treasury note yield
TMUBMUSD02Y,
2.298%
stood at 2.278% versus 2.326% Wednesday afternoon. -
The yield on the 30-year Treasury bond
TMUBMUSD30Y,
2.451%
was 2.459%, compared with 2.479% late Wednesday.
What’s driving the market?
Treasury yields have risen sharply in the first three months of 2022 as inflation accelerated to a nearly 40-year high and the Federal Reserve signaled it would be much more aggressive in raising interest rates and otherwise tightening monetary policy in an effort to get a grip on soaring prics.
Read: U.S. government bonds are having one of their worst quarters since the U.S. Civil War
The yield curve, meanwhile, has flattened significantly as short-term rates have soared, with a key measure — the spread between 10-year and 2-year notes —– briefly inverting on Tuesday. A sustained inversion of that area of the curve is seen as a reliable indicator of recession albeit with a lag of up to two years.
See: What stock-market investors need to know about the bond market’s recession signal
Meanwhile, oil futures
CL.1,
CL00,
which surged to around 14-year highs in early March in reaction to Russia’s invasion of Ukraine, were falling sharply Thursday after news reports said President Joe Biden was poised to order up to 1 million barrels of oil per day released from the nation’s strategic petroleum reserve.
In U.S. economic data due Thursday, February personal consumption and expenditures, or PCE, is set for release at 8:30 a.m. Eastern, which includes the PCE core price index, the Fed’s favored inflation gauge. Economists surveyed by The Wall Street Journal are looking for a 0.4% monthly rise after a 0.5% rise in January.
Personal income and spending are both forecast to rise 0.5%.
Data on weekly unemployment claims are also due at 8:30 a.m., with first-time applications for benefits last week expected to rise to 195,000 from 187,000 the previous week.
What are analysts saying?
Analysts at UniCredit said they see increasing signs the yield on the 10-year U.S. Treasury note, as well as the yield on the 10-year German government bond
TMBMKDE-10Y,
known as the bund, have “peaked for the time being.”
“In money markets, eight additional rate hikes by the Fed are priced in for the current year, and the peak level of the fed funds target rate is seen at close to 3.00% by the middle of next year,” they wrote. “It is currently barely conceivable that investors would position for an even steeper and/or longer rate-hike cycle.”
