Bond Report: 10-year Treasury yield books biggest weekly climb in over a month


U.S. Treasury yields fell Friday as slipping global equity markets propped up the value of haven investments. Still, yields have been edging higher since last week after a string of indicators affirmed the U.S. economy’s strength.

What are Treasurys doing?

The 10-year Treasury note yield

fell 0.7 basis point to 1.632% on Friday, leaving it up 6.6 basis points this week, its biggest such increase since mid-March. But for the month benchmark maturity slid 11.7 basis points in April.

The 2-year note rate

was steady at 0.162%, leaving the short-dated maturity virtually unchanged for the week and month. Meanwhile the 30-year bond yield

edged 0.8 basis point lower to 2.302%, trimming its weekly drop to 5.1 basis points but extending its monthly increase to 12.6 basis points.

What’s driving Treasurys?

The Federal Reserve’s preferred inflation gauge of personal consumption expenditures was up 0.5% in March, leaving it up 2.3% year-over-year. Personal incomes jumped 21.1%, marking its largest gain on record, while consumer spending surged 4.2%

The data reflects the momentum behind the U.S. economic recovery as hundreds of billions of dollars in direct government checks course through households and vaccinations cover close to half the U.S. population.

Analysts had been anticipating an upswing in inflation readings over the next few months, but it’s a larger question whether the price pressures can persist into the end of the year. The Federal Reserve on Wednesday described the recent rise in inflation as “transitory,” suggesting it would look past recent data.

Dallas Fed President Robert Kaplan said the U.S. central bank should start talking about tapering its asset purchases, in contrast with Fed Chairman Jerome Powell’s comments that speculation about tapering was premature.

What did market participants say?

Tom di Galoma of Seaport Global Securities said he was “looking for higher rates as the calendar flips from April to May on stronger economic data and heavy Treasury supply,” in a note.

See: Powell’s dovish pose is leaving the bond market vulnerable to an inflation surge

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