This post was originally published on this site
Treasury yields moved higher Monday, building on a sharp rise over the past two weeks that has taken rates to multiyear highs, as investors awaited remarks by Federal Reserve Chairman Jerome Powell and continued to monitor the Russia-Ukraine war.
What are yields doing?
-
The yield on the 10-year Treasury note
TMUBMUSD10Y,
2.188% ,
compared with 2.146% at 3 p.m. Eastern on Friday. Yields and debt prices move opposite each other. -
The 2-year Treasury note yield
TMUBMUSD02Y,
1.986%
was, compared with 1.955% Friday afternoon. -
The yield on the 30-year Treasury bond
TMUBMUSD30Y,
2.438%
versus 2.417% late Friday. - Based on 3 p.m. levels, the yield on the 10-year Treasury note was up 42.4 basis points in the two weeks ending Friday, the largest two-week jump since November 2016, according to Dow Jones Market Data. The 2-year yield rose 46.5 basis points over the same stretch, its biggest two-week rise since April 2008. 2- and 10-year rates last week hit levels last seen in May 2019.
What’s driving the market?
Powell is scheduled to speak at an economic conference at noon, while Atlanta Fed President Raphael Bostic is slated to speak Monday morning.
The Fed last week delivered a widely expected quarter-point rate increase and signaled it expected to deliver a total of 10 to 11 such hikes through the end of 2023. Some Fed officials have argued for the prospect of lifting rates by a half-point increment in the future, an option that Powell hasn’t ruled out.
Treasury yields had retreated sharply last month as Russia’s invasion of Ukraine triggered demand for traditional havens, including government paper, as stocks and other assets perceived as risky fell. Fighting continues in Ukraine but investor appetite for risk soon revived, allowing yields to rebound.
Major central banks, including the Fed, have signaled more concern over the ability of the war to stoke already strong inflation via surging prices for oil and other commodities rather than the hit to growth.
The Ukrainian government refused demands by Russia to surrender the southern port city of Mariupol as Russian forces continued to bombard Ukrainian cities. The demand by Russia came hours after Ukrainian authorities said Moscow’s forces bombed an art school that was sheltering about 400 people.
Stiff resistance has prevented Russian forces from making a quick takeover of the country. The Wall Street Journal reported that senior U.S. officials see signs Russia is adjusting its strategy to secure territorial objectives and use leverage to pressure Kyiv to accept neutrality between Moscow and the West.
What are analysts saying?
“Late last week, several FOMC (Federal Open Market Committee) members stressed the possibility of 50 [basis point] increases in the fed funds target rate at upcoming rate-setting meetings. About a dozen committee members are scheduled to make public comments this week and we anticipate the focus will remain on likely near-term policy moves, whereas we think discussion about longer-term key-rate targets might remain subordinated,” wrote analysts at UniCredit Bank, in a note.
“Consequently, flattening pressure on the [2-year/10-year Treasury] yield curve will remain high, while we might again see periods of inversion in intermediate maturities,” they said.
