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Friday, January 27, 2023

US bond yields fall as data backs up Fed statement

by David Barbusia

Nuevanew yorkDec 15 – US Treasury yields, which move in the opposite direction with prices, fell on Thursday despite weak economic data and a return to debt returns in Europe, where the European Central Bank raised interest rates and showed signs of more aggressive hikes. lamps.

* Falling returns, especially at the long end of the curve, led to a choppy session on Wednesday, in which investors kept to the view that the central bank may soon raise rates despite the Federal Reserve adopting a dovish tone. Adopting a soft stance due to a weak economy.

* Elsewhere, Wall Street’s main indexes opened lower as the Fed’s guidance for tightening monetary policy dispelled hopes that the rally cycle would soon end.

* Yields fell on Thursday after a report reported a bigger-than-expected fall in US retail sales for November, a sign that higher borrowing costs are hurting consumer strength.

* Also, US factory output fell more than expected in November as rising rates dampened demand and business investment.

“With core inflation declining, we expect economic weakness will persuade the Fed to start cutting rates again late next year,” Capital Economics said in a note.

* In Europe, the yield on two-year German bonds fell to 14 years after European Central Bank President Christine Lagarde targeted more aggressive rate hikes, raising rates by 50 basis points. was headed for its biggest daily jump.

* The yield on the benchmark 10-year US Treasury bond fell 3 basis points (bp) to 3.471%, and the 30-year bond yield fell more than 4 bp to 3.493%.

* The yield on two-year paper, which better reflects monetary policy expectations, was unchanged at 4.248%.

* The closely watched portion of the Treasury yield curve, which measures the difference between the return on two-year and 10-year debt, deepened its holdings by -78.4 basis points.

World Nation News Desk
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