10-year and 30-year Treasury yields close at their highest levels since November
The Treasury sold off Wednesday, pushing long-term interest rates to their highest level in nearly three months, following a $16 billion sale of 20-year Treasury notes and the release of minutes from the Federal Reserve’s January policy meeting.
What happen
The yield on the two-year Treasury note BX:TMUBMUSD02Y rose 4.3 basis points to 4.653% from Tuesday’s 4.610%. Yields rose two out of the past three, ending at the third highest level this year. Yields move in the opposite direction of prices.
The yield on the 10-year Treasury note BX:TMUBMUSD10Y rose 4.7 basis points to 4.323% from 4.276% on Tuesday.
The yield on the 30-year Treasury note BX:TMUBMUSD30Y rose 4.3 basis points to 4.491% from 4.448% on Tuesday.
Wednesday’s levels are the highest for 10-year and 30-year Treasury yields since Nov. 30, based on 3 p.m. ET readings from Dow Jones Market Data.
What drove the market
The U.S. Treasury’s $16 billion 20-year Treasury auction produced “very ugly” results, with dealers taking a higher-than-average 21.2% stake. BTIG in New York.
The auction results sparked an afternoon sell-off in government debt ahead of the release of minutes from the Federal Reserve’s Jan. 30-31 policy meeting at 2 p.m. Eastern time.
The selling continued as minutes of the Federal Reserve’s most recent meeting came out. The minutes took a hawkish turn and included discussion of the possibility of inflation stalling.
Federal funds futures traders gave the central bank a 93.5% chance of leaving interest rates unchanged between 5.25% and 5.5% on March 20, according to the CME FedWatch tool. The likelihood of an interest rate cut of at least 25bp by June was found to be 72.3%. The central bank is expected to cut interest rates for at least three quarters until December.
Meanwhile, at a banking event in Washington D.C. on Wednesday, Federal Reserve President Michelle Bowman said a rate cut was not possible at this time due to uncertainty in economic data.
What Strategists Say
“After a burst of optimism at the end of 2023, we are coming back to reality as inflation persists,” said David Russell, head of global market strategy at TradeStation. “Policymakers see no reason to rush to cut interest rates, especially given strong labor market conditions. Investors can now return to wait-and-see mode, keeping an eye on the next employment and CPI reports. “Things may change until we get more data.”
