Bond Report: 10-year Treasury yield rises to 1.57%, trimming sizable weekly slide

United States

Long-dated U.S. government debt Friday morning came under some selling pressure, pushing prices lower and yields higher, but Treasury yields remain firmly down for the week, with fixed-income experts attributing some of the retrenchment in yields to hedge fund short covering and concerns about tensions between Russia and the U.S.

How are Treasurys performing?
  • The 10-year Treasury note BX:TMUBMUSD10Y was yielding 1.571%, up 4 basis points.
  • The 30-year Treasury note BX:TMUBMUSD30Y was at 2.276%, rising 6.6 basis points on the day.
  • The 2-year Treasury note was at 0.161%, compared with 0.155% on Thursday at 3 p.m. Eastern.

For the week, the 10-year Treasury yield is down 9.3 basis points, the 30-year was down 6.4 basis points, while the 2-year has seen a weekly rise of 0.4 basis point, according to FactSet data.

What’s driving the fixed-income market?

Treasury yields were climbing early Friday after government debt yields for the 10-year hit a the lowest level in about a month, blamed partly on President Biden’s announcement of retaliatory measures on Thursday against Russia over election interference, the SolarWinds cyberattack.

Buying of bonds pushed yields lower but traders said that investor unwinding of positions, with a number of bets focused on yields rising, helped to exacerbate the slide in bond yields, experts said.

Recent downward moves for yields came even as U.S. economic data has mostly been stronger, pointing to an eventual upsurge in inflation, anathema to bonds because they undercut the instruments fixed value.

On Friday, investors parsed data on housing ahead a report on consumer sentiment due at 10 a.m. Eastern Time.

U.S. housing starts rose 19.4% monthly in March following February’s sharp decline of 11.3%, the US Census Bureau and the US Department of Housing and Urban Development reported Friday. Meanwhile, building permits increased 2.7% in March, after falling 8.8% in February.  

What are strategists saying?

“Overall, a strong read on the housing sector but at this stage in the recovery the gains were old news long before released. Moreover, another strong data point is apparently all that was needed for Treasuries to rally further,” wrote Ian Lyngen and Ben Jeffery, fixed-income analysts at BMO Capital Markets, in a Friday note.

“Treasuries were trading with a modest flattening skew ahead of this morning’s first round of data. Since the print we’ve simply seen the price action extended on the margin,” the BMO analysts wrote.