10-year Treasury yield remains below 3% - CNET

10-year Treasury yield remains below 3% – CNET

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Treasury yields were mostly lower early Friday, with the 10-year note holding below 3% after increased selling of stocks and other perceived risky assets sparked government bond buying. State related to the refuge during the previous session.

Fixed income traders will benefit from an early jump on the three-day U.S. Independence Day holiday, with SIFMA recommending an early close at 2 p.m. Eastern for bond markets on Friday. US markets will be closed on Monday July 4th.

What Do Yields Do
  • The yield of the 10-year Treasury note TMUBMUSD10Y,
    was at 2.963%, down from 2.973% as of 3:00 p.m. EST Thursday. Yields and debt prices move in opposite directions.

  • The yield of the 2-year Treasury note TMUBMUSD02Y,
    was 2.858% against 2.925% Thursday afternoon.

  • The yield of the 30-year Treasury bills TMUBMUSD30Y,
    rose to 3.156%, from 3.121% on Thursday evening.

What is driving the market

Yields on Treasuries, which move opposite to prices, rose sharply again in the first half of the year as stocks tumbled in response to inflation at a multi-decade high. Yields fell from highs as fears of aggressive monetary tightening by the Federal Reserve and other major central banks could trigger a recession began to overshadow inflation fears.

The Atlanta Fed on Thursday lowered its second-quarter GDP estimate to -1%, from +0.3% on Monday. The latest estimate comes after first-quarter GDP fell at an annual rate of 1.6% in a revised reading.

Two consecutive quarters of GDP contraction is often used as a loose definition of recession, although it is not the criterion used by the National Bureau of Economic Research, the official arbiter of US business cycles. The NBER defines a recession as “a significant decline in economic activity that spreads throughout the economy and lasts for more than a few months”.

It was another brutal second quarter and first half for Treasury and other fixed income investors. As for Treasuries, the 1.477 percentage point rise seen in the first and second quarters marked the largest two-quarter increase since the second quarter of 1994, according to Dow Jones Market Data, a year that has also saw a sharp Treasury sell-off as the Federal Reserve proceeded with a series of aggressive rate hikes.

Investors will get a glimpse of gauges of private sector economic activity on Friday, with the release of June’s final reading of the S&P Global US Manufacturing Purchasers Index at 9:45 a.m. closely watched manufacturing index from the Institute for Supply Management at 10:00 a.m. EST. May construction spending data is also due at 10 a.m.

What analysts say

“As the second quarter drew to a close, bond markets continued to rally strongly in what now appears to be a third consecutive decline. However, the late rally in bond markets did not change much in what was an exceptionally challenging environment for any balanced portfolio composition,” the UniCredit Bank economists wrote.

U.S. Treasury bills over one year fell 3.8% in the second quarter and 9.1% in the first half, UniCredit said. “Add the negative return contributions (as measured by price indices) from the Euro Stoxx 50 at 11.5% (2Q) and 19.6% (1H) and the S&P 500 SPX,
down 16.4% in 2Q and 20.6% in 1H, and there’s been no place to hide so far in 2022 except for cash equivalents or exposure to certain raw materials,” they wrote.

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