1 day ago
What Could Finally Bring U.S. Treasury Yields Down
U.S. government bond prices have been falling, which means their yields have been rising.
This week, worries about France, the Iran conflict and weaker U.S. jobs data briefly pushed yields down.
But that improvement did not last, and yields rose again by Friday afternoon.
The unemployment rate increased slightly, but not enough to convince investors that the economy is weakening sharply.
Analysts say a much bigger rise in unemployment or a large shortfall in new jobs might help bring yields down.
Investors might also buy more U.S. bonds if they move money away from French bonds.
Lower U.S. government borrowing and an end to the Iran war could also help, but those changes would take major policy decisions.
For now, the forces pushing yields higher remain in place.
U.S. 10-year Treasury yields briefly fell this week after concerns about France, Iran and weaker-than-expected U.S. labor data.
The decline faded by Friday afternoon, and the 10-year yield has risen for five consecutive weeks.
The September unemployment rate edged up to 4.2% from 4.1% in August, but analysts said a more substantial labor-market slowdown may be needed to reverse the bond selloff.
Investors could also shift from French government bonds to Treasuries as concerns grow about France’s debt burden and rising bond yields.
Lower U.S. deficits, an end to the Iran war and reduced Treasury debt issuance could make bonds more attractive, but would require major policy changes.
- Who
- U.S. Treasury bond investors, with analysts including Tom Essaye, Ian Lyngen and Joyce Huang commenting on the market.
- What
- Treasury yields briefly declined, then resumed rising; the article considers what could bring them down.
- Where
- The U.S. Treasury market, with French government bonds also affecting investor choices.
- When
- The week described in the article, including Friday's labor report and market moves.
- Why
- Yields are being driven by factors beyond expectations for Federal Reserve rates, including inflation, the Iran conflict, government borrowing and labor-market conditions.
Key facts
- 10-year yield move
- By Friday morning, it was down 0.13 percentage point from the multi-decade high reached Wednesday.
- Recent yield trend
- The 10-year yield had risen for five consecutive weeks, its longest such streak since 2024.
- September unemployment rate
- 4.2%, up from 4.1% in August.
- iShares 20+ Year Treasury Bond ETF
- Closed at a record low of $77.48 on Friday.
- French debt outlook
- France's debt burden is expected to exceed 120% of GDP next year.
- Potential supports for Treasury prices
- A substantial labor-market deterioration or a shift from European government bonds into Treasuries could put downward pressure on yields.
- Policy changes cited
- Reducing the U.S. deficit, ending the Iran war and reducing Treasury debt issuance could make Treasuries more appealing.
Quotes
Tom Essaye
Founder and president of Sevens Report
“When we saw the 10-year yield decline, I think it was more of a seller exhaustion. I mean, you haven’t seen Treasuries this stretched to one side in several years.”
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“a sizable increase in the unemployment rate and/or a substantial undershoot of payrolls to truly derail the momentum underlying the bond rout”
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Joyce Huang
Head of Multisector Fixed Income at Vanguard
“Ultimately, today’s move is a reminder that long-term Treasury yields are being driven by more than just Fed expectations.”
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