The 10-year Treasury yield reached a three-month high of 1.45% on Friday, as investors continued to respond to the Federal Reserve’s policy announcement on Wednesday.
Of particular interest to bond investors was the central bank’s signal that the $ 120 billion reduction in monthly bond purchases “could be effective soon.” In a parade of Fed policymakers on Friday, Loretta Mester, president of the Cleveland Fed, said she wanted the Fed to start tapping in November and end by next June.
What the Treasury yields
10 year Treasury Note TMUBMUSD10Y,
Production 1.459%, vs. 1.408% Thursday at 3 p.m. This is the highest level since July 1.
30 year Treasury bond rate TMUBMUSD30Y,
Was 1.987%, up from 1.923% a day earlier.
2 year treasury note TMUBMUSD02Y,
Thursday had a new 52-week high yield of 0.274%, compared to 0.259%.
For the week, according to Dow Jones market data, the 10-year-old has gained 9 basis points for the biggest one-week gain since March 19th. The week has increased by 5 basis points for 2 years, which is the biggest weekly profit since June 1. Meanwhile, the -0 year rate this week.8. The basis has improved basis points, the biggest gain in a week since June 25.
What is driving the market?
Yields rose on Friday as bond traders began to digest the possibility that the Federal Reserve would soon begin to return to its quantitative easing program.
He said he wants policymakers to start tapping in November and finish it sometime before next June, with Mester, president of the Cleveland Fed, adding that he sees interest rates rising for the first time by the end of 2022.
Meanwhile, Kansas City Fed’s Easter George said in a virtual speech that the U.S. economy would not return to “normal” any time soon. The epidemic will leave behind lasting economic change and even the central bank could significantly change the way US interest rates are set, according to George.
Speaking separately at a Fed event on Friday, Fed Chairman Jerome Powell said he had not seen an economy that combined so many reports of labor shortages with so many unemployed workers.
The string of speakers comes after the Fed set the stage for a formal announcement of tapping at a central bank meeting on Wednesday, November, which could see a billion 2 trillion monthly reduction in Treasury and billion 1 trillion reduction in mortgage-backed securities. Closed in December, especially if the labor market continues to improve from the Covid-1 pandemic epidemic.
Treasury yields have been rising since Wednesday but until Friday, production progress was restrained in view of the fact that the Fed will continue to buy enough in debt and will not move quickly to raise interest rates, which currently stands at 0% to 0.25% range.
A projection by Fed members on Wednesday of interest rate hikes, known as dot plots, hinted at faster growth than expected for 2022, but Powell said in a question and answer that the so-called dot-plots should not be one of the places where rates would end. Will be used as a prophetic tool.
According to economic data released on Friday, new home sales in the United States rose in August as the market for newly constructed buildings showed signs of stabilizing even after months of decline. U.S. new-home sales rose 1.5% year-on-year to 740,000, the government said Friday. The average forecast of economists obtained by MarketWatch was at an annual rate of 720,000 for August.
What analysts are saying
“A bearish reprimand in October is consistent with our view that investors will try to redefine the upper limit of the trading range and 1.42% 10s have now successfully breached, the next target range is 1.55% to 1.60%,” said Ian Lingz, strategist at BMO Capital Markets. Wrote in a daily research note.