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A selloff for U.S. Treasurys paused early Thursday, with yields pulling back from levels last seen more than three years ago.
What are yields doing?
-
The yield on the 10-year Treasury note
TMUBMUSD10Y,
2.870%
fell to 2.872%, compared with 2.911% at 3 p.m. Eastern on Wednesday, its highest level since Dec. 13, 2018, according to Dow Jones Market Data -
The 2-year Treasury note yield
TMUBMUSD02Y,
2.560%
was 2.548% versus 2.573% on on Tuesday afternoon, which was its highest since Jan. 28, 2019. -
The 30-year Treasury bond
TMUBMUSD30Y,
2.929%
yielded 2.931%, down slightly from 2.988% late Tuesday, the highest since April 22, 2019.
What’s driving the market?
Treasury yields have risen sharply in 2022 in response to inflation running its hottest in four decades. Investors have also penciled in increasingly aggressive expectations around the Federal Reserve, which is expected to deliver a series of interest rate increases and to begin aggressively winding down its balance sheet in coming meetings.
Russia’s invasion of Ukraine has exacerbated inflation fears, sending oil and other commodity prices soaring.
Investors will hear from several Fed officials on Wednesday, including San Francisco Fed President Mary Daly, Chicago Fed President Charles Evans and Atlanta Fed President Raphael Bostic.
Evans on Tuesday said the fed funds rate could rise as high as 2.5% by year-end and indicated the Fed could lift rates in half percentage point increments, rather than the typical quarter-point moves, at least a few times this year. Some Fed officials have called for lifting the rate toward 3.5% by year-end.
The Fed’s Beige Book compilation of anecdotal U.S. economic activity is due at 2 p.m. ET. A look at March existing home sales is due at 10 a.m. ET.
What are analysts saying?
“The economic calendar won’t inspire markets to anything today. The avalanche of Fed speeches continues. Eyes may slowly turn to the next policy meeting scheduled on May 4,” wrote analysts at KBC Bank in Brussels.
“The release of the Fed’s Beige Book later today formally kicks off the process. (U.S.) yields already took a big advance on policy normalization but to call off the upward trend now is premature to us. The US 10 year yield is nearing the 3% level while the 30 year tested that psychological landmark already yesterday and today. For the 2 year yield we’re looking for a sustained move above the shoulder top in the head‐and‐shoulder pattern of 2018‐2019 (2.58‐2.60%),” they said.
