Yields on U.S. Treasury bonds rose on Thursday following comments from a Federal Reserve official regarding future interest rate hikes and in anticipation of a government auction of 30-year bonds. The movements continue a trend of elevated yields in the bond market.
On Thursday, the yield on the 10-year Treasury note increased by four basis points to 5.322%. This followed a session on Wednesday where it reached its highest level since 2002. The 30-year Treasury bond yield rose more than four basis points to 5.705%, near a 24-year high it approached in the previous session. The yield for the 2-year Treasury note was up nearly three basis points to 4.793%. Yields and bond prices move in opposite directions.
The market activity occurred as Federal Reserve Governor Christopher Waller stated that additional interest rate hikes are necessary to lower inflation to the central bank’s 2% target. Speaking at a forum in Istanbul, Waller said, “The hikes do not need to come at consecutive meetings, but they should be in place in an acceptable period of time.”
His comments followed the release of minutes from the Federal Reserve’s most recent meeting on Wednesday. According to the minutes, officials indicated an expectation to raise interest rates again before the end of the year.
Investors and market participants are also monitoring a series of Treasury auctions this week. The Treasury Department is scheduled to sell $22 billion in 30-year bonds on Thursday. This follows an auction of $39 billion in 10-year notes on Wednesday and the sale of $58 billion in 3-year notes on Tuesday.
In a note issued late Wednesday, Ian Lyngen of BMO Capital Markets commented on the market’s reception of the debt sales. “The 10-year auction has set the tone for the Treasury market – at least for the moment,” Lyngen wrote. He added that Thursday’s auction of long-term bonds will be “the next barometer of demand for US debt.”
In addition to the bond auction, market participants are awaiting the release of other economic data, including weekly initial jobless claims on Thursday and the preliminary October report on Michigan Consumer Sentiment, scheduled for Friday.
