Treasury yields were mixed early Thursday as investors awaited the outcome of a European Central Bank policy meeting and looked ahead to U.S. inflation data due Friday.
What yields are doing
- The yield on the 10-year Treasury note TMUBMUSD10Y, 3.026% was 3.019%, compared with 3.028% at 3 p.m. Eastern on Wednesday.
- The 2-year Treasury note yield TMUBMUSD02Y, 2.782% stood at 2.783% versus 2.772% Wednesday, which was its highest 3 p.m. level since Dec. 12, 2018, according to Dow Jones Market Data.
- The 30-yeaer Treasury bond TMUBMUSD30Y, 3.169% yielded 3.162%, compared with 3.178% late Wednesday.
What’s driving the market
The European Central Bank will be in the spotlight Thursday and is expected to lay the groundwork to end asset purchases and begin lifting interest rates in July.
Treasury yields have pushed back to the upside this week as investors also await Friday’s U.S. May consumer-price index reading, with the focus on the outlook for economic growth as the Federal Reserve attempts to rein in stubborn inflationary pressures.
U.S. economic data on tap for Thursday include weekly jobless claims at 8:30 a.m.
For Friday’s CPI release, economists surveyed by The Wall Street Journal expect the year-over-year rate to slip to 8.2% from 8.3% in April. That would be down from a March reading of 8.5%, but still be elevated. The core reading, which strips out food and energy costs, is seen edging down to 5.9% year-over-year versus 6.2% in April.
However, fixings, or derivative-like instruments related to Treasury inflation-protected securities, or TIPS, imply that May’s year-over-year consumer-price index reading on Friday will come in hotter-than-expected and rise above March’s 40-year high in coming months.
Inflation-wary investors are also paying attention to oil prices, with Brent BRN00, +0.11% and West Texas Intermediate crude CL.1, +0.02% futures ending at three-month highs above $120 a barrel on Wednesday. Oil ticked lower in activity Thursday.
What analysts say
“The week has seen yields edge higher, but not without pushback from risk assets and a meaningful amount of trepidation surrounding the notion that yields can only move higher based on supply and the looming inflation data; to say nothing of the FOMC decision next week,” wrote Ian Lyngen and Benjamin Jeffery, strategists at BMO Capital Markets, in a note, referring to the Fed’s rate-setting Federal Open Market Committee.
“The present focus is the degree of hawkishness the Committee is willing to signal via the dot plot; the short answer is enough to bring the official projections roughly in line with the futures market and Powell’s 50 bp (basis point) cadence comments,” they wrote. “On net, we expect it will be a ‘hawkish hike’ of 50 bp next week; although there is room for the Fed to demonstrate near-term angst regarding the trajectory of the real economy.”
Add Comment