U.S. Treasury yields edged higher on Friday, continuing a upward trend fueled by recent selling pressure triggered by hawkish Federal Reserve rhetoric and robust economic indicators. Despite the gains, the broader global bond selloff showed signs of stabilization.
The benchmark 10-year Treasury note rose less than one basis point to 5.17%, after briefly touching its highest level since June 2007 the previous day. The 30-year Treasury bond held steady at 5.463%, following a surge to levels unseen since 2004. Meanwhile, the 2-year note yield remained largely unchanged at 4.899%.
Yields across major international markets also saw movement, with Japanese government bonds, U.K. gilts, and German bunds hitting fresh highs earlier in the week. However, Eurozone and Japanese government bond yields dipped slightly on Friday.
A primary driver of the recent yield increases has been comments from Federal Reserve Governor Michael Barr. In a Wednesday speech, Barr indicated that “further policy adjustments” would be necessary to bring inflation back to target, reinforcing expectations for tighter monetary policy. Additional upward pressure came from persistently high oil prices and a purchasing managers’ index report reaching its highest point in over four years.
According to the CME FedWatch tool, traders are currently pricing in a nearly 71% probability of a rate hike in October.
Looking ahead, investors are set to review the University of Michigan consumer sentiment report and durable goods data on Friday. Strategists from ING noted that while rate hike fears may be sufficiently discounted to address inflation concerns, government bond yields remain under pressure due to debt dynamics. This dynamic is expected to lead to a re-widening of swap spreads, particularly in the 10-year sector.
ING analysts also pointed out that Treasury Secretary Bessent’s buyback program has so far been effective, resulting in tighter swap spreads.
My pension fund loved the dip yesterday, but today’s gains are just eroding those profits. Global bonds are exhausting to track right now.
Seventy-one percent chance of a hike in October? That’s a bold bet by traders. I’m staying in cash until data clears up.
Did anyone else catch the bit about swap spreads? Tightening seems to be working per Bessent, but the debt dynamics worry me.
Wait, the selloff is cooling but yields are still rising? That sounds like stabilization, not relief. I’m nervous about what comes next.
Honestly, 5.17% on the ten-year feels brutal for normal folks trying to buy a home. The Fed is playing with fire here.