Bond yields were steady on Thursday, after a big rally in bond prices from signs the U.S. economy is slowing, the rate-hike cycle has peaked and less supply than feared.
What’s happening
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The yield on the 2-year Treasury
BX:TMUBMUSD02Y
was 4.96%, down 0 basis points. Yields move in the opposite direction to prices. -
The yield on the 10-year Treasury
BX:TMUBMUSD10Y
was 4.73%, down 0.5 basis points. -
The yield on the 30-year Treasury
BX:TMUBMUSD30Y
was 4.92%, down 0.4 basis points.
What’s driving markets
Wednesday saw several crucial pieces of information enter the market. Federal Reserve Chair Jerome Powell didn’t commit to a peak in the rate-hike cycle, but his tone was considered by analysts to be on the dovish side.
David Mericle, a Goldman Sachs economist, said there were a few dovish elements: that the FOMC statement acknowledged the tightening in financial conditions, that Powell said above-potential growth on its own wouldn’t warrant another rate hike, and that he downplayed a recent rise in the inflation expectations component of the University of Michigan consumer sentiment index.
In addition, Treasury refunding was a bit below estimates at $112 billion, with less issuance of 10- and 30-year notes than in August. “We expected a large coupon increase due to rising funding needs from expectations around the deficit and QT lasting throughout 2024. Instead, Treasury about-faced, relative to the August increases, likely due to fear of increasing term premium in the long-end. They also guided that the next increase in February will likely be the final one,” said Jason Williams, an analyst at Citi.
A key forward-looking indicator, the Institute for Supply Management’s manufacturing index, came in well below estimates, as the ADP private-sector employment gauge surprised to the downside.
Ahead of Friday’s crucial nonfarm payrolls report, the economic calendar includes weekly jobless claims and third-quarter productivity.
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