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May 19, 2022

News of the Trade

Latest trading, investing, and financial news

Treasury yields bounce higher, with 10-year rate above 2.9% again, after a choppy week

Treasury yields bounced back Friday morning as equities attempted to recover from a steep selloff and traders looked to close out a choppy week following the latest U.S. inflation readings.

What yields are doing
  • The yield on the 10-year Treasury note
    TMUBMUSD10Y,
    2.916%
    rose to 2.926%, up from 2.815% at 3 p.m. Eastern on Thursday. Yields and debt prices move opposite each other.

  • The 2-year Treasury yield
    TMUBMUSD02Y,
    2.586%
    was at 2.599%, up from 2.52% Thursday afternoon.

  • The yield on the 30-year Treasury bond
    TMUBMUSD30Y,
    2.988%
    rose to 3.061% versus 2.985% late Thursday.

What’s driving the market

Yields are attempting to bounce back following a choppy week for Treasurys. On Monday, the yield on the 10-year note briefly hit a 3 1/2-year high above 3.2% before pulling back. It fell through Thursday as a rout in stocks fueled haven-related buying by investors seeking safety, but staged a rebound early Friday.

Stocks have tumbled hard this week, pushing the S&P 500
SPX,
+2.06%
to the brink of a bear market. Equities opened higher on Friday, however, with all three major indexes up in New York morning trading.

Read: The S&P 500 is on the brink of a bear market. Here’s the threshold.

In an interview aired late Thursday on National Public Radio’s Marketplace program, Federal Reserve Chairman Jerome Powell warned that the central bank’s ability to tighten policy without sending the economy into a steep downturn wasn’t solely up to policy makers.

“So the question whether we can execute a soft landing or not, it may actually depend on factors that we don’t control,” Powell said. The Fed chief, who won confirmation for another four-year term from the Senate on Thursday, underlined the Fed’s aim to get inflation under control and acknowledged that policy makers probably should have moved earlier to begin raising rates.

Powell quibbled with the suggestion that last week he had taken the prospect of a 75 basis point rate rise off the table, emphasizing that he had said, “We weren’t actively considering that.”

“But I would just say, we have a series of expectations about the economy. If things come in better than we expect, then we’re prepared to do less. If they come in worse than we expect, then we’re prepared to do more,” he said.

Data released Friday showed U.S. import prices cooled in April, with prices from overseas goods unchanged after increasing 2.9% in March. The University of Michigan consumer sentiment index for May came in at 59.1, below estimates and the lowest level in more than 10 years.

What analysts are saying

“As the dust settles after a volatile week for U.S. rates, equities, and crypto, investors are now faced with the underlying question of whether the repricing was a one-off or the beginning of a broader trend that will define the next several weeks of trading in financial markets,” said BMO Capital Markets strategists Ian Lyngen and Ben Jeffery. “In Treasuries, the 3.20% yield peak in 10s has become a key level as the sector consolidates this morning around 2.90%.”