The 10-year Treasury yield rose more than 2 basis points to 5.183% on Friday, a day after touching its highest level since June 2007. The move came as a global bond selloff in Japan, the U.K. and the eurozone showed signs of slowing, while hawkish Fed commentary and firm economic data kept U.S. yields elevated.
Yields climb across the curve
The benchmark 10-year Treasury note rose more than 2 basis points to 5.183%, a day after touching its highest rate since June 2007. The 30-year Treasury bond added more than 1 basis point to reach 5.476%, a level not seen since 2004. The 2-year note yield rose less than 1 basis point to 4.901%.
One basis point equals 0.01%, and yields move opposite to prices. However, the pace of the selloff eased elsewhere: eurozone and Japanese government bond yields edged lower on Friday, even as Japanese government bonds, U.K. gilts, German bunds and other eurozone bonds hit fresh highs this week.
Fed comments and firm data drive the move
Treasury yields climbed after Federal Reserve Governor Michael Barr said in a Wednesday speech that further policy adjustments can be expected to bring inflation down to target. Stubbornly high oil prices and a purchasing managers' index report that hit its highest level in more than four years added to the pressure.
As a result, traders were pricing in a 66% chance of a rate hike in October, according to the CME FedWatch tool. On Friday, the Commerce Department reported that durable goods orders in August were relatively unchanged, while economists polled by Dow Jones had expected a 0.3% decline.
Analysts see pressure on the debt dynamic
According to CNBC, ING's Padhraic Garvey and Benjamin Schroeder wrote in a note on Friday that they see "enough rate hike fears discounted at this juncture" to address perceived inflation risks. Yet the strategists said government bond yields remain primed to stay under pressure on a pure debt dynamic theory, which translates into pressure for some re-widening in swap spreads, especially in the 10-year area.
Source: CNBC
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