Bond Report: Treasury yields rise to highest levels in at least a week, even as U.S. consumer sentiment holds near lows


Treasury yields rose Friday, notching their highest levels in at least a week, ahead of the Federal Reserve’s policy meeting next week and as the University of Michigan’s latest U.S. consumer survey showed sentiment mired near decade lows.

What are yields doing?
  • The yield on the 10-year Treasury note

    rose to 1.369%, compared with 1.331% at 3 p.m. Eastern on Thursday. Yields and debt prices move in opposite directions.
  • The 2-year Treasury note yield

    rose to 0.224%, versus 0.217% on Thursday afternoon.
  • The 30-year Treasury bond yield

    edged up to 1.909% from 1.88% on Thursday.
  • For the week, the 10-year hit its highest yield since Sept. 7, the 30-year long bond was at its highest rate since Sept. 10 and the 2-year Treasury note yields are the highest since Aug. 26, according to data compiled by Dow Jones Market Data.
What’s driving the market?

In data released Friday, the University of Michigan’s preliminary consumer sentiment reading ticked up to 71.0 in September, a slight rebound from the prior month but still short of expectations. Economists surveyed by The Wall Street Journal, on average, had been looking for the index to rise to 72.0.

The reading remains close to the roughly 10-year low seen in August, with consumers feeling worse about the economy today than at any point during the COVID-19 pandemic.

For Treasury investors, however, the focus was on what the survey-based indicator said about inflation expectations. One-year expectations rose to 4.7% from 4.6%, while longer-term expectations were unchanged at 2.9%.

U.S. debt yields had risen slightly on Thursday after U.S. August retail sales showed an unexpected rise. Also, the Philadelphia Federal Reserve Bank’s activity index rose sharply in September, breaking a four-month streak of declines. Weekly claims for first-time unemployment benefits rose, partly reflecting the effect of Hurricane Ida, which made landfall in Louisiana in late August.

The rise in yields came even as the Dow Jones Industrial Average
the S&P 500 index

and the Nasdaq Composite Index

on Friday traded solidly lower, wiping out modest week-to-date gains.

The rate-setting Federal Open Market Committee is set to meet Sept. 21-22, and it is anticipated that the timing of tapering of monthly asset purchases of $120 billion in Treasurys and mortgage-backed securities will be announced.

Need to Know: Investors are in an historically rotten mood. Their three biggest fears are overblown, strategist says.

What are analysts saying?

The University of Michigan sentiment report was, “overall, an uninspired read that indicated higher costs are weighing on the outlook, as is the delta variant,” strategist Ian Lyngen of BMO Capital Markets wrote in a note.

Read: Not even U.S. Treasury investors can escape the ‘gravitational pull of zero’

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