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Bond Report: Treasury yields hold steady near multiyear highs to start second week in February

Yields for government debt retreated Monday, taking a breather after the 2- and 10-year rates hit their highest levels in years at the end of last week, following a better-than-expected jobs report.

Investors are looking ahead to important data on consumer prices on Thursday and auctions of government debt this week, which could help to provide further color around appetite for Treasurys.

What are yields doing?

The 10-year Treasury note TMUBMUSD10Y, 1.921% yielded 1.915%, 1.5 basis points down from 1.930% on Friday at 3 p.m. Eastern Time, which marked the highest yield since Dec. 23, 2019.
The 2-year Treasury note TMUBMUSD02Y, 1.292% yields 1.294%, receding 2.8 basis points lower from 1.322% at the end of last week, when the rate hit its highest level since Feb. 21, 2020, and had its biggest daily yield gain since March 10, 2020, according to Dow Jones Market Data.
The 30-year Treasury TMUBMUSD30Y, 2.218%, known as the long bond, was yielding 2.217%, down 1.5 basis points from Friday afternoon.

What’s driving the market?

Yields edged lower to start the second week of February, even after employment data on Friday appeared to support an aggressive path monetary policy tightening by the Fed, which is focused on combating pricing pressures.

Friday’s data released by the Labor Department showed that the U.S. economy added 467,000 jobs in January — well above economists’ expectations for an addition of just 150,000 jobs, and with some projecting losses for January due to the omicron variant surge.

Treasury yields jumped after the data but pulled back somewhat on Monday.

Looking ahead, investors will watch for the January consumer-price index on Thursday for further evidence of inflation. A $50 billion auction of 3-year Treasury notes TMUBMUSD03M, 0.225% is set for Tuesday, followed by a sale of $37 billion in 10-year debt on Wednesday and an auction of $23 billion in long bonds on Thursday, after inflation data will come into focus this week.

Investors, meanwhile, are watching developments between Russia and Western nations, with the prospect of conflict in Ukraine growing.

White House national security adviser Jake Sullivan told Fox News on Sunday that “any day now, Russia could take military action against Ukraine or it could be a couple of weeks from now,” but still left room for the possibility of a diplomatic solution. “We are in the window,” the adviser said.

Read: France’s Macron heads for talks with Russia’s Putin to de-escalate Ukraine crisis

What strategists are saying

“We have little economic data until we see CPI on Thursday. We do have Treasury supply in 3yr, 10yr, and 30yr this week. On the geopolitical front a Russian invasion of Ukraine is likely according to Jake Sullivan, the national security adviser to President Biden,” wrote managing director Tom di Galoma of Seaport Global Holdings, in a daily note.

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