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Treasury yields fell slightly on Wednesday as the Federal Reserve minutes showed the central bank would keep policy accommodative, but rates for benchmark notes are still on pace for the sharpest weekly climb since early January, as investors speculate on how the Fed might respond to rising inflation expectations.
What are Treasurys doing?
The 10-year Treasury note yield TMUBMUSD10Y, 1.291% was flat at 1.297%, a day after seeing its biggest one-day climb in a year. The 10-year thus far was on pace for its largest weekly yield gain since Jan. 8, according to Dow Jones Market Data based on a 3 p.m. Eastern close.
The 2-year note rate TMUBMUSD02Y, 0.113% fell 1.2 basis point to 0.109%, while the 30-year bond yield TMUBMUSD30Y, 2.051% slid 2.2 basis points to 2.067%. The yield for the so-called long-bond was on track for its sharpest weekly move since Feb. 5.
Bond prices fall as yields climb.
What’s driving Treasurys?
The Federal Reserve’s minutes from its January meeting showed senior officials were sanguine over the medium-term prospects of the economy, and weren’t fretting over the risk of inflation.
Yet recent economic data suggested fears of price pressures would continue to haunt investors.
Consumers opened up their wallets after several states eased lockdown measures to combat the pandemic and stimulus checks arrived in the mail. Retail sales in the U.S. jumped 5.3% last month, after a 1% fall in December. Meanwhile, producer prices jumped 1.3% in January.
In other data, industrial production for January rose 0.9%, and the February reading of the National Association of Home Builders’ index came in at 84.
Read: Fed’s Esther George says she is not concerned about Treasury-yield spike
The U.S. Treasury Department’s $27 billion sale of 20-year bonds drew tepid demand but wasn’t enough to dislodge the bullish tilt to Wednesday’s bond-market trading, which helped to mitigate some of the sharp yield moves on the day.
What did market participants say?
“The minutes from the latest Fed meeting didn’t stray too far from the message Fed Chair Powell has been sending to market participants in his recent speeches where he indicated it’s not the right time to change policy,” said Charlie Ripley, senior investment strategist for Allianz Investment Management.
