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U.S. Treasury yields held steady on Monday, after government debt ended last week with the sharpest weekly rise in rates in years.
Traders are looking ahead to updates later in the week, including an important report, the consumer-price index, and a reading on U.S. retail sales due. Ahead of that data, investors starting on Tuesday will be watching the re-confirmation hearings of Federal Reserve Chairman Jerome Powell and Lael Brainard who has been nominated to become the Fed’s No. 2 after Vice Chairman Richard Clarida stepped down.
What are yields doing?
-
The 10-year Treasury note
TMUBMUSD10Y,
1.795%
yields 1.773%, compared with 1.769% at 3 p.m. Eastern Time. Yields and debt prices move opposite each other. -
The 2-year Treasury note rate
TMUBMUSD02Y,
0.886%
was at 0.870%, slightly up versus 0.868%. -
The 30-year Treasury bond
TMUBMUSD30Y,
2.138%
yields 2.131%, up from 2.116% on Friday afternoon. - On Friday, the 10-year posted its biggest weekly gain since the period that ended Sept. 13, 2019; while the 30-year notched its largest weekly gain since June 5, 2020; and the 2-year logged its largest weekly gain since Oct. 11, 2019.
What’s driving the market
The Senate confirmation hearings for the No. 1 and 2 posts at the Fed come amid a period of rising yields that have kicked off 2022, pushing the 10-year benchmark on Friday to around the highest rate in nearly two years.
Powell’s nomination hearing for a second term as Fed boss is scheduled for 10 a.m. Eastern Time Tuesday, while Fed Brainard’s is due to take place at the same time on Thursday.
Neither are expected to be challenged, despite pushback from some Democrats who wanted someone tougher on bank regulations and climate change. However, the policy makers commentary on the state of the economy and the strategy of combating a surge in inflation will be closely watched by investors.
The prospects of higher inflation and tighter Fed policy to address it have been underpinning the recent bounce in rates, contributing added significance to reports on elevated pricing pressures in recent weeks.
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The closely watched CPI reading is due at 8:30 a.m. ET on Wednesday, where consumer prices are expected to have risen more than 7% from a year earlier, for the first time since 1982. The producer-price index is slated for 8:30 a.m. Thursday.
On Friday, December’s jobs report showed only 199,000 new jobs were created, significantly below the 422,000 gain expected by economists surveyed by The Wall Street Journal. Meanwhile, the unemployment rate slipped to 3.9% from 4.2%.
What strategists are saying
“Look for another upward ratchet if December core CPI arrives higher than .5% on Wednesday morning. Two things to consider before revising economic and market thinking for the entire year, however,” wrote Jim Vogel, executive vice president at FHN Financial, in a Monday research note. “First, 2022 headlines are incremental and not pivotal. The pivot was six weeks ago. Second, last week’s flows pushed yields 20-25bp higher without the volume that accompanies a major turn.”
