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Treasury yields were holding mostly steady on Wednesday, with the 30-year rate easing back from a March high, as investors looked ahead to U.S. housing starts data and remain concerned about the debt ceiling talks in Washington.
What happened
-
The yield on the 2-year Treasury
TMUBMUSD02Y,
4.092%
was up slightly at 4.076% from 4.072% on Tuesday. -
The yield on the 10-year Treasury
TMUBMUSD10Y,
3.524%
slipped to 3.525% from 3.548% on Tuesday, when it reached the highest level since May 1. -
The yield on the 30-year Treasury
TMUBMUSD30Y,
3.838%
traded at 3.840% from 3.871% late Tuesday, which was the highest level since March 8.
What’s driving markets
After Tuesday’s data showing U.S. retail sales for April rebounding, but falling short of expectations, while industrial production rose for the first time in two months, some investors were considering the possibility that the economy is stronger than originally thought.
The only data on tap for Wednesday will be April housing starts, due at 8:30 a.m. Eastern, with market attention more focused on Friday’s appearance by Federal Reserve Chairman Jerome Powell for more guidance on interest rates.
Meanwhile, the latest round of discussions ended just ahead of the market close on Tuesday. The Biden White House referred to those talks as “productive and direct,” while House Speaker Kevin McCarthy referred to the meeting as “a little more productive.”
What analysts are saying
Saxo Bank strategists said since the March regional banking turmoil, markets have been stuck in indecision and confusion on what comes next a recession or expansion and if inflation will keep dropping.
“Treasury yields will be an important coincident indicator across all asset markets for next steps and the upper and lower bounds of the 10-year benchmark yield should be on everyone’s radar,” the strategists said in a note.
“Below a 3.25% yield and the market is more urgently looking for an imminent recession and above 3.64%, and perhaps 3.75% and markets are either suggesting that the economic expansion will continue and/or that longer term inflation expectations may be rising again. Yields may also react strongly to the US debt ceiling issue finally clearing,” they said.
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