10-year Treasury yield pulls back from 3% as two-day Fed meeting kicks off


Treasury yields fell on Tuesday morning, a day after the 10-year note hit the 3% threshold for the first time since December 2018, with investors preparing for the Federal Reserve’s decision to ‘this week.

What are the yields doing
  • The yield on the 10-year Treasury note stood at 2.929%, below 2.995% at 3pm on Monday. The benchmark briefly exceeded 3% on Monday, its first move above that threshold since December 3, 2018, according to data from Tullett Prebon.

  • The performance of the 2-year Treasury note TMUBMUSD02Y,
    2.723%
    it dropped to 2.691% from 2.729% on Monday afternoon. Monday’s level was its highest closing, based on 3 p.m. levels, from December 14, 2018.

  • The yield on 30-year Treasury bonds TMUBMUSD 30Y,
    2,995%
    was 2.982%, below 3.06% on Monday afternoon, which was its highest since March 6, 2019.

What is driving the market

With the Federal Reserve launching a two-day political meeting on Tuesday, policymakers are expected to provide an interest rate hike of 50 basis points, or half a percentage point, compared to the typical quarterly move. point. They are also expected to announce a plan to quickly reduce the central bank’s nearly $ 9 trillion balance sheet.

Reads: The Fed’s half-point rate hike has been seen baking on the cake

The Fed is seen moving aggressively as it struggles to curb inflation that is nearing its peak in four decades.

Data released on Tuesday showed that job vacancies in the United States rose to a record 11.55 in March and the number of people quitting also reached an all-time high, another sign of a historically tight labor market. Meanwhile, factory orders rose 2.2% last month.

The performance of the 10-year German bond TMBMKDE-10Y,
0.942%,
known as the bund, possibly the most important financial instrument in Europe, reached 1% on Tuesday for the first time in almost seven years. It had been trading in negative territory until March.

The Reserve Bank of Australia on Tuesday raised its official cash rate for the first time since November 2010 as it seeks to control inflation, which has risen to its highest level in 20 years. The RBA raised its official cash rate to 0.35% from an all-time low of 0.10%, a move higher than expected, and the RBA reported more likely increases in the next few months.

What analysts say

“It is equally important for the market as a whole that the absolute level of rates is the speed with which the movement towards higher yields has taken place. A slow and forceful movement towards a positive real environment that does not harden excessively. the financial conditions do not drive a faster sale of domestic stocks is the variety of responses that would give coverage to the Fed to proceed aggressively, “wrote strategists Benjamin Jeffery and Ian Lyngen. in a note.

“The S&P 500 SPX,
+ 0.45%
a 14% drop [year to date] and the NASDAQ COMP,
+ 0.13%
21% in the red in 2022 reinforces the sensitivity of the technology sector to higher discount rates, “they wrote.

I’ll see: Powell wants to bring rates closer to neutral. But what is this? Think between 5% and 6%, says the former Fed staff member



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