1 day ago
Treasury Selloff Pushes Long-Term Yields to 24-Year Highs
US government bonds lost value on Monday, so the interest rates they pay went up.
The rates on 10-year and 30-year bonds reached their highest levels since 2002.
A report showed that services businesses grew more slowly, but their costs rose sharply.
Higher costs can make investors worry that inflation will stay high.
Some traders think the Federal Reserve may raise interest rates again this year.
Investors will also see how much demand there is for new government bonds at upcoming auctions.
One bond expert said the 30-year rate could rise above 6%.
That level has not been reached since 2000.
On Monday, 10-year Treasury yields rose 7 basis points to 5.34%, their highest since 2002.
The 30-year yield also climbed at least 7 basis points, reaching 5.7%, its highest level since 2002.
September services data showed slower sector growth but prices paid rose to 74, the highest since July 2022.
Swap markets reflected about a 25% chance of a Fed rate hike in October and a full quarter-point hike by December.
Investors were watching upcoming 10- and 30-year debt auctions, with a $58 billion three-year note sale scheduled for Tuesday.
- Who
- US Treasury bond investors and traders; the Federal Reserve is central to rate expectations.
- What
- Treasury yields rose, with the 10-year at 5.34% and the 30-year at 5.7%.
- Where
- The US Treasury bond market.
- When
- Monday; the article does not specify a date.
- Why
- Investors were concerned about persistent inflation and strong nominal growth, while services prices rose sharply.
Factors supporting higher yields
Market caution and demand test
Inflation and economic conditions
Factors supporting higher yields
BMO Capital Markets strategist Vail Hartman said the services report pointed to mounting inflationary pressures and strong nominal growth, supporting the bond-bearish trend.
Market caution and demand test
The services sector expanded at a slower pace in September, even as prices paid exceeded forecasts.
Rate outlook and bond demand
Factors supporting higher yields
Traders priced in a possibility of further Fed rate increases, and BMO Asset Management's Earl Davis said a 30-year yield above 6% was inevitable.
Market caution and demand test
Upcoming 10- and 30-year debt auctions will test investor demand for longer-dated bonds as yields climb.
Key facts
- 10-year yield
- 5.34%, up at least 7 basis points; highest since 2002.
- 30-year yield
- 5.7%, up at least 7 basis points; highest since 2002.
- Shorter-dated Treasuries
- Yields rose about 2 to 4 basis points.
- Services prices paid
- September ISM reading of 74, the highest since July 2022.
- October Fed hike odds
- Interest-rate swaps indicated about a 25% chance.
- December Fed expectations
- Markets priced in a full quarter-point hike by the December meeting.
- Upcoming sale
- A $58 billion sale of three-year notes was scheduled for Tuesday.
- 30-year yield forecast
- BMO Asset Management's Earl Davis called a yield above 6% inevitable and said it could happen that month.
Quotes
Vail Hartman
Strategist at BMO Capital Markets
“The overall tone of the report points to mounting inflationary pressures and strong nominal growth, reinforcing a central bond-bearish underpinning over the past several weeks.”
livemint.com
Sources
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