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The yield on the policy-sensitive 2-year Treasury note ended the New York session Monday at a 15-year high as investors await this week’s October inflation report for further clues to how high the Federal Reserve could ultimately raise interest rates and how long they will keep them there.
What yields are doing
-
The yield on the 2-year Treasury note
TMUBMUSD02Y,
4.704%
rose 7.4 basis points to 4.726% at 3 p.m. Eastern, its highest finish since July 25, 2007, according to Dow Jones Market Data. Yields and debt prices move opposite each other. -
The 10-year Treasury yield
TMUBMUSD10Y,
4.215%
rose 5.5 basis points to 4.212%. -
The yield on the 30-year Treasury bond
TMUBMUSD30Y,
4.321%
was up 6.5 basis points at 4.312%.
Market drivers
Traders and investors are awaiting the October consumer-price index, or CPI, which is due on Thursday. Economists surveyed by The Wall Street Journal expect CPI to show a 0.6% monthly rise, with the year-over-year rate slowing to 7.9% from 8.2% in September. The core reading, which strips out volatile food and energy prices, is forecast to show a 0.5% monthly increase, slowing the year-over-year rate to 6.5% from 6.6%.
Meanwhile, investors continued to react to last week’s comments by Federal Reserve Chairman Jerome Powell, who spoke to reporters after policy makers delivered another 75-basis-point increase in the fed-funds rate. Powell emphasized that rates would need to move higher than Fed officials had previously expected and signaled that borrowing costs may remain elevated.
Richmond Fed President Tom Barkin was scheduled to deliver remarks on inflation in the evening.
Barkin and Boston Fed President Susan Collins both spoke publicly on Friday. Barkin made the case for slowing the pace of rate hikes, but like Collins and Fed Chair Jerome Powell, signaled that it’s unclear just how high rates will have to go to squelch inflation.
What analysts are saying
“We’re sympathetic to investors’ eagerness to lock in the pricing of next
month’s Fed decision,” said BMO Capital Markets strategists Ian Lyngen and Ben Jeffery. “However, the reality is that there remains an array of data and potential macro developments between now and the final meeting of 2022. The October CPI release is on deck and likely to have a far more material impact on US rates than payrolls has accomplished.”
