Yields on the 10-year US Treasury bond rose to 4.7%, amid fears that the Federal Reserve (Fed) will cut interest rates less than expected.
US bonds soar to a 3-week high: what Fed projection impacted them
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The bond market tightened in the United States. This day, 10-year US Treasury bond yields rose to 4.7%, highs not seen since May 3. Two news items impacted: the poor auctions of shorter-term bonds and the fear that the Federal Reserve (Fed) will cut interest rates less than expected.
Regarding auctions, they were for US$69,000 million in 2-year bonds and US$70,000 million in 5-year bonds, arousing limited interest. Specific, “the ratio between supply and coverage, a widely followed demand indicator, stood at 2.3, below the average of the last ten auctions (2.45)”experts indicated.
So, The Treasury sold 5-year bonds with a yield of 4.55%, more than one basis point above the yield offered in the previous auctionwhile the 2-year bonds offered a return one basis point higher than the previous one, up to 4.91%.
Additionally, longer-term yields led the selling and the Treasury curve steepened, with the 30-year bond yield rising 8.5 basis points, above 4.65%.
“This rebound in yields coincided with several events that caused investors change their mind about the interest rate cuts that the Federal Reserve (Fed) will carry out“, sources revealed.
“Consumers’ assessment of current business conditions was slightly less positive than last month. However, The strength of the labor market continued to reinforce consumers’ general assessment of the current situation“explained Dana M. Peterson, chief economist of the organization. In addition, the survey has also shown an increase in concern about a possible recession in the world’s leading economy.
On the other hand, the president of the Minneapolis Fed, Neel Kashkari, scared the market by stating in an interview that “many good months” of inflation data would be needed before the central bank considers cutting interest rates. Likewise, Kashkari stressed that the market “should not rule out anything,” since the Fed could step on the accelerator again and raise interest rates if inflation does not decrease further.
Source: Ambito
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