By Vivien Lou Chen and William Watts
Treasurys saw renewed pressure Monday, pushing the 10-year yield above 2.8%, as a selloff in equities let up and worries about inflation and recession remained.
What yields are doing
The yield on the 10-year Treasury note (XTUP:BX:TMUBMUSD10Y) was up 7.2 basis points to 2.857% at 3 p.m. Eastern on Friday. Yields and debt prices move opposite each other.
The 2-year Treasury yield (XTUP:BX:TMUBMUSD02Y) rose 4.1 basis points to 2.622%.
The 30-year Treasury bond (XTUP:BX:TMUBMUSD30Y) was 7.1 basis points higher at 3.065%.
What’s driving the market
Major U.S. stock indexes rose sharply Monday, with some analysts crediting remarks by President Joe Biden, who said China tariffs imposed during the Trump administration were under consideration and would be discussed with Treasury Secretary Janet Yellen upon his return to the U.S.
Biden also said the U.S. would respond militarily to defend Taiwan from aggression by China, appearing to break with the long-held U.S. policy of strategic ambiguity.Dow industrials (DOW:DJIA) ended nearly 620 points higher, up 2%, while the S&P 500 index (S&P:SPX) gained 1.9% and the Nasdaq rose 1.6%. That was a bounce after the Dow on Friday logged its eight straight losing week and the S&P 500 briefly traded below the threshold that would mark a 20% pullback from its Jan. 3 record close. A finish below that threshold would confirm a bear market for the large-cap benchmark.
The equity rout weighed on Treasury yields the past two weeks as investors sought safety in government paper.
Yields, however, have risen sharply in 2022 as investors fret about persistently high inflation and an aggressive response by the Federal Reserve, which delivered a half-point rate increase earlier this month —- its largest in more than 20 years. Chairman Jerome Powell has said half-point hikes are on the table for the Fed’s next two policy meetings.
What analysts say
”A number of Fed and ECB (European Central Bank) members are scheduled to speak, but the fate for fixed-income markets seems to reside with the equity complex at the moment,” wrote economists at UniCredit Bank in a Monday note.
“The S&P 500 has registered losses for seven consecutive weeks —- something that has only happened three times in the past century. In two of those three instances, however, an eighth week of losses followed. Hence, if history is any guide, market sentiment is likely to remain strained, leaving government bonds supported overall,” they said.