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U.S. Treasury yields headed higher Friday morning, with investors awaiting the final speech of the month from Federal Reserve Chairman Jerome Powell ahead of the central bank’s policy meeting on Nov. 2-3 when it is widely expected to announce the process of reducing its bond purchases.
What are yields doing?
-
The 10-year Treasury note
TMUBMUSD10Y,
1.692%
yields 1.677%, up slightly from 1.674% at 3 p.m. Eastern Time on Thursday. -
The 2-year Treasury note
TMUBMUSD02Y,
0.469%
yields 0.453%, up from 0.449% a day ago. -
The 30-year Treasury bond rate
TMUBMUSD30Y,
2.134%
was at 2.116%, edging down from 2.127% on Thursday. - For the week, the 10-year Treasury note has climbed 10.3 basis points, the 30-year bond has added 6.8 basis points, while the 2-year Treasury note, which is hanging around its highest yield since March of 2020, was up 5 basis points.
What’s driving the market?
The fixed-income market is watching for comments from Powell, who will deliver a speech at a Bank for International Settlements conference at 11 a.m. Eastern Time.
The Fed chief’s speech will be the final comments from the policy makers until the policy meeting in two weeks, and Powell’s comments may hold particular significance with investors who have seen yields on the 2-year rise to the highest level in over 18 months and the 10-year touching heights not seen since early May this year.
In overnight trade the benchmark 10-year hit around 1.70%, FactSet data show.
Yields have been climbing over the past week as investors bet that inflation will remain elevated in the fallout from the COVID-19 pandemic, which has helped cause supply-chain bottlenecks and labor shortages as economies attempt to normalize after the 18 month long pandemic.
On Thursday, Atlanta Federal Reserve Bank President Raphael Bostic said those factors coupled with consumer demand, could keep inflation elevated into next year.
“I was thinking late third, maybe early fourth quarter for 2022,” Bostic said during a CNBC interview Thursday afternoon.
“Part of the ultimate answer to how long this will take will be how quickly we resolve some of the coronavirus issues as well as some of the supply chain challenges that are happening at a global level,” he told the business network.
Looking ahead in U.S. economic data, IHS Markit’s flash PMIs for October are due at 9:45 a.m. ET.
What analysts are saying
“Ten year yields held the 1.7% area overnight where we believe buyers surfaced
however at some point the high yield of 1.774% will be tested
shortly as the quarter pushes on,” wrote Thomas di Galoma, managing director and head of Treasury trading at Seaport Global Holdings
