Bond Yields Pause as 10-Year Treasury Backs Up
Bond yields took a breather on Monday following a rise in the benchmark 10-year Treasury yield last week. The yield on the 2-year Treasury dropped by 1.7 basis points to 4.47%. It’s important to note that yields move in the opposite direction to prices.
Meanwhile, the yield on the 10-year Treasury saw a slight decrease of 1 basis point, settling at 4.16%. The 30-year Treasury yield also dipped, down by 1.2 basis points to 4.36%.
The rise in the 10-year Treasury yield of nearly 16 basis points last week is causing rate strategists at Bank of America to raise concerns about a potential shift higher in the 10-year range due to strong U.S. economic data. They also pointed out a historical trend: when the 10-year yield rises in January, as it did by 3.3 basis points during the first month of 2024, it has seen gains for the rest of the first quarter 70% of the time since 1963. Additionally, when January yields were higher, February through the rest of the year rose 61% of the time.
Although Monday featured the release of the New York Fed’s measure of consumer inflation expectations and speeches from Fed Gov. Michelle Bowman and Minneapolis Fed President Neel Kashkari, all eyes are on Tuesday’s release of the consumer price index. Economists at Daiwa predict that while gasoline prices are easing and there is a downtrend in food inflation, the impact will be offset by rising services prices.
Analyst comment
This news can be evaluated as neutral. The slight decrease in bond yields indicates a temporary pause after the recent increase. Rate strategists have raised concerns about a potential shift higher in the 10-year range, but historical trends suggest possible gains in the first quarter. The release of the consumer price index on Tuesday will be closely watched. Overall, the market is expected to remain cautious and monitor economic data for further direction.
