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Bond Report: 10-year, 30-year U.S. Treasury yield books largest weekly rise in 6 weeks as inflation fears heat up

Long-term U.S. Treasury yields clamber higher Friday, recording their sharpest weekly rise in about six weeks, as debt prices came under pressure over worries about looming inflation as the economy recovers from the coronavirus pandemic with the aid of large amounts of fiscal and monetary stimulus. Read More...

Long-term U.S. Treasury yields clambered higher Friday, recording their sharpest weekly rise in about six weeks, as debt prices came under pressure over worries about looming inflation as the economy recovers from the coronavirus pandemic with the aid of large amounts of fiscal and monetary stimulus.

What are Treasurys doing?

The 10-year Treasury note yield TMUBMUSD10Y, 1.344% rose 5.8 basis points to 1.344%, contributing to a weekly climb of 14.5 basis points, its largest such move since Jan. 8, according to Dow Jones Market Data.

The 30-year bond yield TMUBMUSD30Y, 2.141% gained 6.4 basis points to 2.140%, extending its weekly rise to 13.7 basis points, also its largest such increase in six weeks. The 2-year note rate TMUBMUSD02Y, 0.104% was up 0.2 basis point at 0.109%, and virtually unchanged for the week.

What’s driving Treasurys?

Investors remained worried about the potential for inflation when and if Congress passes a new pandemic relief bill that could inject another trillion dollars or more into the U.S. economy, potentially bolstering savings that may be spent when the vaccine rollout inoculates a growing share of the U.S. population.

Senate Majority Leader Chuck Schumer said he expected the White House to sign the stimulus bill before March 14, when enhanced federal unemployment benefits for millions of Americans are set to expire.

Read: Here’s one reason why you should take U.S. inflation fears with a grain of salt

But labor-market data, notably a recent jobless claims report, indicating modest employment gains last month and an elevated pace of layoffs, could sap the enthusiasm of the bond bears.

On Thursday, Treasury Secretary Janet Yellen said that a large fiscal relief package was necessary to counter the economic hit from the pandemic, defending the Biden administration’s proposed $1.9 trillion price tag for aid.

Meanwhile, in U.S. economic data on Friday, existing home sales for January were up 0.6% to a seasonally-adjusted annual rate of 6.69 million, the National Association of Realtors said.

The flash reading of the IHS Markit U.S. composite purchasing managers index rose to a six-year high of 58.8 in February from 58.7 in the previous month. Any reading over 50 indicates improving economic activity.

New York Fed President John Williams said on Friday he was not concerned with the rise in longer-term bond yields.

What did market participants say?

“Rates are bound to rise further, but it is not so much about the level as about the speed of the adjustment. And it is clearly too fast,” said Antoine Bouvet, a rates strategist at ING.

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