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What Could Finally Bring U.S. Treasury Yields Down

What Could Finally Bring U.S. Treasury Yields Down
What it will take for bond yields to drop · livemint.com

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.

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.”
livemint.com
“a sizable increase in the unemployment rate and/or a substantial undershoot of payrolls to truly derail the momentum underlying the bond rout”
livemint.com

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.”
livemint.com

Sources

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