Treasury yields remained mostly higher on Friday following a significant move prompted by indications that the Federal Reserve may intensify its fight against inflation. Alongside this, a weak auction of 30-year notes added to the upward pressure on yields.
Current Yields
- The yield on the 2-year Treasury note (BX:TMUBMUSD02Y) held steady at 5.024%. After increasing by 8.6 basis points on Thursday, it reached its highest level since October 31, standing at 5.022%.
- The yield on the 10-year Treasury note (BX:TMUBMUSD10Y) also remained stable at 4.625% following a significant jump of 12.3 basis points, reaching 4.629%.
- The yield on the 30-year Treasury note (BX:TMUBMUSD30Y) saw a slight increase, reaching 4.772%. On Thursday, it climbed by 12.2 basis points to 4.777%, marking one of its largest one-day gains since June 13, 2022.
Factors Influencing the Market
Investors are currently assessing the impact of a poorly received Treasury auction of 30-year bonds which led to a sharp sell-off in long-dated bonds and had a weighing effect on stocks.
It remains unclear whether the reported ransomware attack against the U.S. unit of the Industrial & Commercial Bank of China had any influence on the Treasury auction and the subsequent disruption in the U.S. Treasury market.
Federal Reserve Chair Warns of Inflation "Head Fakes"
Investors Await Consumer Price Inflation Data
Federal Reserve Chairman Jerome Powell expressed caution on Thursday regarding potential "head fakes" from inflation, suggesting that current interest rates may not be sufficient to reach the central bank's 2% target. This statement has refocused investors' attention on data, particularly next week's consumer price inflation data scheduled for release on Tuesday.
Upcoming Fedspeak
Before the release of the inflation data, several high-profile Fed officials are scheduled to speak on Friday. Dallas Fed President Lorie Logan will speak at 7:30 a.m., followed by Atlanta Fed President Raphael Bostic at 9 a.m. and San Francisco Fed President Mary Daly at 1 p.m.
University of Michigan's Preliminary Consumer Sentiment Survey
At 10 a.m., the University of Michigan will release its preliminary consumer sentiment survey for November, providing further insight into consumer confidence.
Expert Analysis
Analysts suggest that despite the absence of major data releases, markets are expected to remain dynamic. However, concerns persist regarding the overall aggressiveness of the rally. Michael Leister, Head of Interest Rates Strategy at Commerzbank, and Marco Stoeckle, Head of Credit Strategy, recommend tactical long positions ahead of the weekend, as they anticipate a potential fading of the steep increase in yields following a poor 30-year auction.
