Thursday, November 14, 2024

Treasury yields remain higher following ugly 20-year bond auction, Fed minutes

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Treasurys sold off on Wednesday following a weak $16 billion sale of 20-year bonds and the release of minutes from the Federal Reserve’s most recent policy meeting.

What’s happening

  • The yield on the 2-year Treasury
    BX:TMUBMUSD02Y
    rose 3.5 basis points to 4.645%, from 4.610% on Tuesday. Yields move in the opposite direction to prices.

  • The yield on the 10-year Treasury
    BX:TMUBMUSD10Y
    advanced 4 basis points to 4.316%, from 4.276% on Tuesday.

  • The yield on the 30-year Treasury
    BX:TMUBMUSD30Y
    rose 3.5 basis points to 4.483%, from 4.448% on Tuesday.

What’s driving markets

Treasury’s $16 billion auction of 20-year notes produced “very ugly” results Wednesday afternoon, with dealers stepping in to take a higher-than-average 21.2% of the sale, according to Tom di Galoma, co-head of global rates trading for BTIG in New York.

The auction results triggered an afternoon selloff in government debt ahead of the 2 p.m. Eastern time release of the minutes from the Federal Reserve’s Jan. 30-31 policy meeting.

The selloff remained in place as the minutes of the Fed’s last meeting came in. The minutes leaned in a hawkish direction and included discussion around the concern that inflation might stall.

Fed-funds futures traders are pricing in a 93.5% probability that the central bank will leave interest rates unchanged at between 5.25% and 5.50% at its next meeting on March 20, according to the CME FedWatch Tool. The chance of at least a 25-basis-point rate cut by June is seen at 71%. The central bank is mostly expected to deliver at least three quarter-point rate cuts by December.

In an interview with SiriusXM that aired on Wednesday and was cited by Bloomberg, Richmond Fed President Thomas Barkin said price pressures in some sectors are still too elevated despite overall improvement in inflation.



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1 COMMENT

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