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Treasury yields rose Monday as investors prepared for a Federal Reserve meeting that’s expected to deliver an outsize rate increase and announce the beginning of the unwind of the central bank’s balance sheet.
What are yields doing?
-
The yield on the 10-year Treasury note
TMUBMUSD10Y,
2.918%
was at 2.941%,up from 2.885% at 3 p.m. Eastern on Friday. Yields and debt prices move opposite each other. -
The 2-year Treasury note yield
TMUBMUSD02Y,
2.719%
was at 2.732% versus 2.696% Friday afternoon. -
The yield on the 30-year Treasury bond
TMUBMUSD30Y,
2.988%
traded at 3%,up rom 2.945% late Friday. - The continued Treasury selloff saw the 10-year yield rise 56.1 basis points in April, the largest monthly rise since December 2009, according to Dow Jones Market Data. The 2-year yield rose 41.2 basis points, its ninth straight monthly rise, while the 30-year rate jumped 50.1 basis points for its largest increase since January 2009.
What’s driving the market?
Fed policy makers will conclude a two-day meeting on Wednesday afternoon. Investors widely expect the central bank to raise the fed funds rate by 50 basis points, or half a percentage point, rather than deliver the typical quarter-point move. Investors have also been judging whether further outsize rate moves are likely in coming policy meetings.
Read: Fed’s half-percentage-point interest rate hike next week seen baked in the cake
The Fed is also expected to announce the wind-down of its balance sheet.
Data due on Monday include the final April reading of the S&P Global U.S. manufacturing purchasing managers index at 9:45 a.m. Eastern.
The Institute for Supply Managment’s April manufacturing index is due at 10 a.m. Economists surveyed by The Wall Street Journal expect it to rise to 57.8% from 57.1 in March. A reading of more than 50% signals an expansion in activity. March construction spending data is also set for release at 10 a.m.
What analysts are saying?
“There doesn’t seem to be much room for [Fed Chairman Jerome] Powell to surprise on the hawkish side. However, tough comments with regard to recent wage developments could spark market speculation about a 75 [basis point] rate hike at one of the upcoming FOMC meetings,” wrote economists at UniCredit, in a note.
“If a 75bp rate hike becomes a viable option following this week’s FOMC meeting, fixed income and equity markets are probably in for another wild ride over the coming days,” they said.
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