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Treasury yields moved higher Thursday, bouncing after long-dated rates fell to their lowest in around five months as investors continued to bet on slowing inflation, then extending their decline after the market easily absorbed the sale of 5-year Treasury notes on Wednesday.
What yields are doing
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The yield on the 2-year Treasury note
BX:TMUBMUSD02Y
was up 2.5 basis points at 4.255%, after falling to the lowest since May in Wednesday’s session. Yields and debt prices move opposite each other. -
The 10-year Treasury note yield
BX:TMUBMUSD10Y
rose 2.9 basis points to 3.816%. -
The yield on the 30-year Treasury bond
BX:TMUBMUSD30Y
rose 2.7 basis points to 3.973%. Yields on the 10-year note and 30-year bond dropped Wednesday to their lowest since July.
Market drivers
Trading was expected to remain thin in the shortened week between the Christmas and New Year’s Day holidays. U.S. bond markets are slated to close early on Friday. Market in the U.S. and much of the world will be closed Monday for the New Year’s Day holiday.
Investors are penciling in a series of interest rate cuts by the Federal Reserve in 2024. Fed-funds futures traders have priced in a roughly 87% chance the Fed will have delivered a rate cut by its March meeting, according to the CME FedWatch tool.
Fears over the market’s ability to absorb a rising tide of Treasury supply, meanwhile, were assuaged after a sale Wednesday of $58 billion in 5-year notes was easily absorbed, following on a sale of 2-year notes a day earlier.
“The U.S. 5-year paper saw a bumper demand, as investors continued to pile in to secure good deals at the current yields based on the expectation that the yields will further crumble when the Fed starts chopping the rates,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank, in a note.
Weekly data on jobless benefit claims is due at 8:30 a.m. Eastern.
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