U.S. Treasury yields rise as Fed hike bets strengthen
Bond markets are under renewed pressure as traders increasingly position for another Federal Reserve rate increase in December. The move keeps borrowing costs elevated across the U.S. economy, with the 10-year Treasury yield remaining above 5% after a sharp jump in the previous session.
Highlights
- U.S. 10-year Treasury yield rises 2 basis points to 5.1271% and 30-year yield climbs 3 basis points to 5.4602% as rate hike bets strengthen.
- CME FedWatch tool prices in 100% odds of a December 9 rate hike, with 87% expecting a 25 basis point increase and 13% a 50 basis point move.
- U.S. West Texas Intermediate for December delivery trades down 0.1% at $88.63 a barrel while Brent crude is up 0.3% at $96.11 amid choppy oil markets.
Yield moves track stronger December rate expectations
As reported by CNBC, U.S. Treasury yields edge higher on Friday as investor expectations for a December Federal Reserve rate hike gather strength.The 10-year U.S. Treasury note yield, a benchmark for mortgages, auto loans and credit card debt, rises 2 basis points to 5.1271%. The 30-year Treasury bond yield, which tends to react to geopolitical risks, is 3 basis points higher at 5.4602%, while the 2-year Treasury note yield, which is more sensitive to short-term Federal Reserve decisions, is 1 basis point lower at 4.8525%.
One basis point equals 0.01%, and yields move inversely to prices. The latest moves follow Thursday's sharp selloff, when the 10-year yield jumped more than 13 basis points to above 5% and the 2-year yield climbed more than 15 basis points.
Inflation data and oil prices remain in focus
Traders now price in a December rate increase as a near certainty. CME Group's FedWatch tool shows 100% odds of a rise at the Dec. 9 meeting, with nearly 87% odds of a 25 basis point increase and about 13% odds of a 50 basis point move.Energy inflation remains a key watchpoint. Oil is set for its second weekly decline as prospects of renewed U.S. strikes against Iran recede, although prices are choppy in early Friday trade, with U.S. West Texas Intermediate for December delivery down 0.1% at $88.63 a barrel and Brent crude up 0.3% at $96.11.
Investors are also awaiting October's producer price index later on Friday. The wholesale inflation measure is expected to show growth of 0.4% for the month, compared with 1.3% in September.
As we previously wrote, the S&P 500 drop highlighted inflation-driven risk-off sentiment and tech-sector weakness.
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