Most Treasury yields jumped amid an aggressive selloff Wednesday morning, as investors awaited U.S. economic growth and inflation data in the next few sessions.
What’s happening
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The yield on the 2-year Treasury
BX:TMUBMUSD02Y
slipped 1.6 basis points to 5.087% from 5.103% on Tuesday. -
The yield on the 10-year Treasury
BX:TMUBMUSD10Y
rose 6.7 basis points to 4.907% from 4.840% Tuesday afternoon. -
The yield on the 30-year Treasury
BX:TMUBMUSD30Y
jumped 8.4 basis points to 5.047% from 4.963% late Tuesday after touching an intraday high of 5.063% on Wednesday. The last time the 30-year rate ended the New York session above 5% was last Friday.
What’s driving markets
Traders are awaiting U.S. data this week that may provide more clues about the strength of the economy and impact the Federal Reserve’s thinking ahead of its Oct. 31-Nov. 1 policy meeting.
A reading on third-quarter GDP is set to be released on Thursday, followed by the Fed’s preferred inflation gauge, the PCE index, on Friday. The U.S. economy may have grown 5% in the third quarter — defying widespread expectations for a slowdown. And economists polled by The Wall Street Journal expect core PCE readings to come in at 0.3% for September and 3.7% on a year-over-year basis.
Data released on Wednesday showed that new home sales rose to a 759,000 annual rate for September, above forecasts, while the August reading was revised slightly higher.
Meanwhile, Will Compernolle, a macro strategist for FHN Financial in New York, said factors like the abundance of Treasurys, stubborn inflation, and a potentially higher neutral fed funds rate were playing important roles in Wednesday’s selloff of long-dated maturities.
Markets are pricing in a 99.2% probability that the Fed will leave interest rates unchanged between 5.25%-5.5% on Nov. 1, according to the CME FedWatch Tool. The chance of a 25-basis-point rate hike to a range of 5.5%-5.75% by the subsequent meeting in December is seen at 29.6%, down from 36.9% a year ago.
Treasury will auction $52 billion of 5-year notes at 1 p.m. Eastern time on Wednesday.
What analysts are saying
“The volatile nature of market conditions has left a number of question marks regarding monetary policy as the Fed rapidly approaches its next policy decision on Nov. 1. At this point, market participants are convinced the Fed will remain on the sideline, but Chair Powell was clear that further rate hikes remain a possibility if inflation concerns remain, increasing the focus on this week’s PCE report released on Friday,” said economists Lindsey Piegza and Lauren Henderson of Stifel, Nicolaus & Co.
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