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US Treasury yields continued to fall on Friday (17th) as investors bet that the Federal Reserve’s interest rate hikes could eventually end.
At 5:57 a.m. ET, the 10-year Treasury yield fell 5.6 basis points to 4.389%. The two-year Treasury yield fell 3.7 basis points to 4.805%.
There is an inverse relationship between yield and price, with 1 basis point equal to 0.01 percentage point.
Data this week showed that persistently high inflation may finally be easing.
The producer price index (PPI) released on Wednesday (15th) showed a fall of 0.5% in October, while economists had expected a small increase. This was the biggest fall in the index since April 2020.
The October consumer price index (CPI) released the day before was also lower than expected. The annual core CPI rate excluding food and energy fell to a 2-year low of 4%; up 0.2% from the previous month.
Weak oil prices have also added to the feeling that inflation is likely to remain low. Crude oil is likely to fall for a fourth consecutive week.
It all reinforces hopes that the Fed may decide to stop raising interest rates and fuel a debate about when to cut rates for the first time.
Henry Allen, an analyst at Deutsche Bank, wrote in a note: “The outlook for a dofis move has increased over the past 24 hours as a series of negative data added to concerns that the Fed has completed its hike. The feeling of breathing.”
“Time will tell if this proves that, but for now at least, it means the 2-year Treasury yield is almost as low as it has been since August, and investors are starting to anticipate a more aggressive 2024,” he said. . A rate cut of just under 100 basis points has now been priced in at the Fed’s December meeting.”
Housing starts and building permits data for October will be released on Friday. There is no scheduled Treasury auction.
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US Treasury yields continued to fall on Friday (17th) as investors bet that the Federal Reserve’s interest rate hikes could eventually end.
At 5:57 a.m. ET, the 10-year Treasury yield fell 5.6 basis points to 4.389%. The two-year Treasury yield fell 3.7 basis points to 4.805%.
There is an inverse relationship between yield and price, with 1 basis point equal to 0.01 percentage point.
Data this week showed that persistently high inflation may finally be easing.
The producer price index (PPI) released on Wednesday (15th) showed a fall of 0.5% in October, while economists had expected a small increase. This was the biggest fall in the index since April 2020.
The October consumer price index (CPI) released the day before was also lower than expected. The annual core CPI rate excluding food and energy fell to a 2-year low of 4%; up 0.2% from the previous month.
Weak oil prices have also added to the feeling that inflation is likely to remain low. Crude oil is likely to fall for a fourth consecutive week.
It all reinforces hopes that the Fed may decide to stop raising interest rates and fuel a debate about when to cut rates for the first time.
Henry Allen, an analyst at Deutsche Bank, wrote in a note: “The outlook for a dofis move has increased over the past 24 hours as a series of negative data added to concerns that the Fed has completed its hike. The feeling of breathing.”
“Time will tell if this proves that, but for now at least, it means the 2-year Treasury yield is almost as low as it has been since August, and investors are starting to anticipate a more aggressive 2024,” he said. . A rate cut of just under 100 basis points has now been priced in at the Fed’s December meeting.”
Housing starts and building permits data for October will be released on Friday. There is no scheduled Treasury auction.
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