MW 10-year Treasury yields rise above 4.3% ahead of inflation and jobs data
By Jamie Chisholm
Benchmark bond yields rose early Tuesday, registering their highest levels since July, partly in response to recent better-than-expected U.S. economic data and concerns about revived inflationary pressures should Donald Trump win next week's election.
What's happening
-- The yield on the 2-year Treasury BX:TMUBMUSD02Y climbed by 1.4 basis points to 4.152%.
-- The yield on the 10-year Treasury BX:TMUBMUSD10Y rose 2.4 basis points to 4.310%.
-- The yield on the 30-year Treasury BX:TMUBMUSD30Y added 2.7 basis points to 4.558%.
What's driving markets
Treasury yields are hitting fresh three-month highs above 4.30% as traders steel themselves to navigate several days replete with potentially weighty market catalysts.
The ICE BoAML MOVE index, a gauge of expected Treasury market volatility has climbed to 130.9, its highest for the year, as nerves build ahead of the November 5 U.S. election, which will impact thinking on the burgeoning fiscal deficit.
"The recent Treasury sell-off also likely incorporates the increased probability of a Republican clean sweep, and potentially unconstrained fiscal power," said Jim Reid, strategist at Deutsche Bank.
Investors are also wary ahead of some updates on inflation and the health of the U.S. labor market this week.
The Federal Reserve's preferred measure of inflation, the personal consumption expenditure index, will be published on Thursday.
Before that, Tuesday will see the start of a slew of jobs data when the job openings report for September is released at 10:00 a.m. Eastern, followed on Wednesday by the ADP private sector jobs number and culminating in Friday's nonfarm payrolls report.
Here are some of the other potential market catalysts due Tuesday for traders to consider:
-- 8:30 a.m. Eastern. U.S. trade balance in goods for September.
-- 9:00 a.m. S&P Case-Shiller home price index (20 cities) for August.
-- 10:00 a.m. U.S. Consumer confidence for October.
-- 10:30 a.m. Atlanta Fed GDPNow assessment.
-- 1:00 p.m. Treasury announces result of $44bn auction of 7-year notes.
Ahead of all that markets are pricing in a 94.9% probability that the Fed will cut interest rates by at least 25 basis points from the range of 4.75% to 5.00% after its next meeting on November 7, according to the CME FedWatch tool.
The probability of a 50 basis point rate cut at the same meeting was priced at 53.3% just a month ago, but is now given zero chance.
"Even with rate cuts expected, recent data has been anything but soft: CPI's still hot, retail sales are solid, and last month's jobs report surprised on the upside," said Stephen Innes, managing partner at SPI Asset Management.
"But with payrolls on the horizon, some expect a weaker number-a 'payback' that could nudge 'Red Wave' vibes just days before the election. October's report, muddied by strikes and hurricanes, will be tricky for policymakers to read and could stir more noise than clarity," Innes added.
-Jamie Chisholm
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(END) Dow Jones Newswires
October 29, 2024 04:54 ET (08:54 GMT)
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