U.S. government bond yields were little changed Monday, after the 30-year Treasury bond put in the largest weekly rate rise in about two months amid rising inflation fears.
Absent any major news in the early part of the week, investors will watch for minutes on Wednesday from the Federal Reserve’s late April meeting, which could provide some guidance on the central bank’s tolerance of rising inflation.
How are Treasurys performing?
-
Yields for the 10-year Treasury note
TMUBMUSD10Y,
1.652%
were at 1.639%, virtually unchanged from levels at Friday at 3 p.m. Eastern Time. -
30-year Treasury yields
TMUBMUSD30Y,
2.368%
were at 2.353%, versus 2.357% at the end of last week. -
Yields for the 2-year Treasury note
TMUBMUSD02Y,
0.149%
were at 0.153%, up 0.2 basis point.
Last week, the 10-year Treasury yield rose 6.3 basis points, the long bond’s yield climbed 8.2 basis points, marking its steepest weekly yield climb since March 12. Meanwhile, the 2-year Treasury put in a weekly rise of 0.8 basis point, according to Dow Jones Market Data.
Bond prices rise as yields fall.
What’s driving fixed-income markets?
With inflation fears still front and center for markets, fixed-income investors may be focused on Wednesday’s release of Fed minutes, which could offer clues about the strategy around escalating pricing pressures.
Last week, Treasury markets were briefly rattled by consumer inflation data that came in at its hottest since 2008, raising the specter of rising pricing pressures in the aftermath of the COVID pandemic. Inflation is viewed as a negative for Treasurys due the fixed value of government debt.
On Monday, Atlanta Fed President Raphael Bostic said it would take a “couple of months” to understand the inflation dynamics that are under way as the economy is recovering from the pandemic. He is a voting member this year at the Federal Open Market Committee and backed a continued easy-policy stance.
“I don’t think we’re going to have clear answers on this at least until early fall, and it may take longer than that,” Bostic said in an interview on CNBC Monday morning.
“It all depends on how rapidly we recover,” he said.
Bostic’s comments came before the Fed’s No. 2, Richard Clarida, said the economy hasn’t hit the benchmark of “substantial further progress” needed for the U.S. central bank to begin scaling back asset purchases.
“What I would say is, in my judgment, through that April employment report, we have not made substantial further progress,” Clarida said, during a conversation at the Atlanta Fed’s financial market conference.
What are strategists and traders saying?
“Taking a step back, Wednesday’s FOMC minutes will offer insight into the Fed’s current thinking on the pace of the recovery and, of course, the risk that inflation picks up in a way that is ultimately considered ‘too much’ by policy makers,” wrote Ian Lyngen and Ben Jeffery, fixed-income analysts at BMO Capital Markets.
