Yields for U.S. government debt were climbing Tuesday, pushing the benchmark Treasury 10-year note to the highest since late October, in the lead-up to the Thanksgiving on Thursday.
Treasury yields accelerated a climb as investors continued to digest President Joe Biden’s nomination on Monday of Jerome Powell for a second, four-year term as Federal Reserve Chairman, with growing expectations that he will drive interest rates higher.
What are yields doing?
- The 10-year Treasury note TMUBMUSD10Y, 1.648% yield was at 1.657%, which would put the benchmark bond near its highest level since Oct. 22, compared with 1.625% at 3 p.m. Eastern Time on Monday.
- The 2-year Treasury note TMUBMUSD02Y, 0.632% rate was at 0.652%, versus 0.580% on Monday, and adding to the notes highest climb since around March of 2020.
- The 30-year Treasury bond TMUBMUSD30Y, 1.999% yields 2.005%, up from 1.978% Monday afternoon.
What’s driving the market
Treasury yields are rising higher on bets that Powell has a new mandate to accelerate the pace of the Fed’s reduction of monthly asset purchases, with an eye toward curbing a surge in inflation and eventually lifting interest rates.
Yields for the shorter-dated debt, the most sensitive to changing interest-rate expectations, have risen more briskly. The 2-year Treasury note yield is hanging around its highest level since March of 2020.
But yields have risen across the board, with Monday marking the sharpest yield climb for the 2s, 10s and 30-year government debt since Nov. 10, according to Dow Jones Market Data.
The selloff in bonds also has been amplified by seasonally lower volumes, analysts say, noting that the days before U.S. Thanksgiving tends to be comparatively thinly traded.
Looking ahead, investors are watching for a reading of the IHS Market U.S. flash composite purchasing managers indexes for both the manufacturing and services sectors at 9:45 a.m. ET.
Later in the session, there is an auction of $ 24 billion in 2-year of floating rate Treasury notes and a sale of $ 59 billion in seven-year TMUBMUSD07Y, 1.577% notes.
What strategists are saying
“Monday’s sell-off continued overnight, primarily because there’s nothing to stop it before the US holiday. Volumes fell quickly after the triple hit from hawkish EU central bank talk, the big increase in real rates after Powell’s reappointment, and two weak Treasury auctions. Selling is focused this morning on 7s and 5s, and small moves are enough to produce new highs on the 5-yr,” wrote Jim Vogel, executive vice president at FHN Financial.