By Sunny Oh
The headline on this article has been corrected to reflect the direction of this week’s yield move
Long-term U.S. Treasury yields climbed sharply this week, despite trading lower on Friday, following testimony from Federal Reserve Chairman Jerome Powell, who entrenched expectations for rate-cuts at the end of this month.
What are Treasurys doing?
The 10-year Treasury note yield /zigman2/quotes/211347051/realtime BX:TMUBMUSD10Y 0.00% was down 1.6 basis points to 2.106% on Friday, trimming its week-long rise to 6.2 basis points. The benchmark bond yield marked its biggest weekly rise since April 5.
The 30-year bond rate /zigman2/quotes/211347052/realtime BX:TMUBMUSD30Y 0.00% was down 0.8 basis point to 2.634%, paring its week-long climb to 8.6 basis points.
The 2-year note yield /zigman2/quotes/211347045/realtime BX:TMUBMUSD02Y 0.00% fell 1.8 basis points to 1.834%, extending a drop for the week to 3.6 basis points.
What’s driving Treasurys?
The Treasurys market has seen a week-long rise in yields, after falling earlier this month to the lowest levels in two years in expectation of Fed interest rate cuts. But a stronger-than-expected rise in consumer prices in June reported on Wednesday, along with weak demand at Treasury auctions, pushed up yields after Powell confirmed the likelihood of a cut in the federal funds rate later this month.
Elsewhere, eurozone industrial production rose for the first time since January, jumping 0.9% in May. The export-dependent eurozone has struggled under the pressure of lingering trade policy tensions, with the U.S. and China having yet reached a deal to end their longstanding trade dispute.
The German 10-year government bond yield /zigman2/quotes/211347112/realtime BX:TMBMKDE-10Y 0.00% rose 1.5 basis points to negative 0.25%, while the French 10-year bond yield /zigman2/quotes/211347162/realtime BX:TMBMKFR-10Y 0.00% climbed 3.9 basis points to 0.06%.
What did market participants’ say?
“Positive surprises in U.S. employment and inflation have finally put a break on the global bond rally. But an unwaveringly dovish Fed is looking past the latest data points and has essentially pre-committed to a July rate cut. Against the backdrop of a lackluster growth and still-muted inflation, the current rise in global yields might be short-lived,” wrote Michael Chang, a rates strategist at Société Générale.
What else is on investors’ radar?
In economic data, U.S. producer prices rose 0.1%, above the 0.1% decrease forecast from economists polled by MarketWatch.
As for the Federal Reserve, Chicago Fed President Charles Evans said he expected two rate-cuts this year to push inflation above the U.S. central bank’s 2% target.
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