Treasury yields fall from October as investors wait for data on core inflation, manufacturing and consumer confidence

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U.S. Treasury yields were lower on Friday, but are higher for the week, a day after the 10-year and 30-year U.S. Treasury yields posted their biggest quarterly increases since March as investor worries about the inflation was intensifying and the world’s central banks were beginning to move away from easy monetary policy parameters.

Fixed-income investors were watching a plethora of US data Friday morning, including personal income and spending in August, manufacturing activity in September and consumer confidence in September.

What do yields do
  • The 10-year treasury bill earns TMUBMUSD10Y,
    1.494%
    1.492%, compared to 1.528% at 3 p.m. EST Thursday.

  • The 2-year Treasury note TMUBMUSD02Y,
    0.281%
    was down 0.278%, up from 0.289% a day ago.

  • The 30-year Treasury bill rate TMUBMUSD30Y,
    2.059%
    was at 2.049%, down from 2.092% on Thursday.

  • Over the week, the 10-year bond rate is up 3.3 basis points, the 30-year bond rate is up 6.2 basis points and the 2-year bond rate has increased weekly by 0 , 4 basis point.

What drives the market?

Government debt yields were down during the session, but rose in a week marked by growing concerns that inflation could be more severe and more persistent than expected.

Federal Reserve Chairman Jerome Powell at a House Financial Services Committee hearing alongside Treasury Secretary Janet Yellen said inflation would come down, but acknowledged that the central bank no It was unclear when the price pressures could be reversed.

Inflation sits well above the Fed’s 2% annual target, even though the labor market is “far, in our opinion, from full employment,” Powell told lawmakers. “This is the very difficult situation we find ourselves in,” he said on Thursday.

At the same time, the prices of assets such as NG00 natural gas,
-1.31%
and CL.1 oil,
-0.33%
have increased, creating energy crises in Europe and Asia. Higher inflation lowers the fixed value of bonds and if the economy continues to overheat, some fear the Fed may need to step up the pace of interest rate hikes once it finishes cutting monthly purchases of active. These developments could encourage bond sellers, pushing yields higher.

Public debt yields are already on the rise after the central bank said after its meeting in late September that it could start cutting its $ 120 billion purchases of treasury bills and securities mortgage-backed before the end of 2021, with plans to end it by the middle of next year. New Fed projections showed that half of the 18 officials plan to hike interest rates by the end of 2022, up from seven in June.

Meanwhile, fixed-income investors are also watching Washington politics, after President Nancy Pelosi overturned a scheduled vote in the U.S. House of Representatives on a bipartisan 1,000 infrastructure bill on Thursday evening. billion dollars, with Democratic lawmakers still unable to agree on their other spending proposals.

In addition to tackling major public works and social programs, Democrat-led Washington on Thursday discussed a deadline to fund the government to avoid a partial shutdown, but postponed action on the federal debt limit.

President Joe Biden enacted a short-term spending bill on Thursday to keep the U.S. federal government operating until December 3, acting with just hours before the partial shutdown.

Going forward, personal income and spending data for August and core inflation are expected at 8:30 am Eastern time; a final reading from Markit on the Manufacturing Purchasing Managers Index for September is expected at 9.45am, and will be followed by the Institute for Supply Management’s manufacturing PMI expected at 10am.

An August construction spending report is also due at 10 a.m., and a final September consumer sentiment reading is expected at the same time, with economists expecting the reading to hold on average at 71.

Among Fed speakers, Philadelphia Fed Chairman Patrick Harker expects to speak on the economic outlook at an event hosted by the New Castle Chamber of Commerce at 11 a.m., and Fed President of Cleveland, Loretta Mester, will deliver a speech at a forum hosted by the Shadow Open. Market commission at 1 p.m.

What analysts say

“We expect the new month to bring higher yields due to the new issue supply schedule that issuers and investors are watching. The weakening to come in November, ”wrote Tom di Galoma, managing director of treasury bill trading at Seaport Global Securities, in a note Friday. “We believe lower yields should be used as a selling opportunity as inflation fears grow in the fall and winter months,” he wrote.


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