U.S. Treasury yields rose in Asian trade on Thursday, driven by shorter-term debt, as Treasury trade resumed after the Veterans Day holiday, with interest-rate hike expectations remaining a key driver.
The two-year Treasury yield rose 4 basis points to 4.765%, while the 10-year yield was up 0.3 basis points at 4.991%, according to Tradeweb.
The short end of the Treasury yield curve, roughly marking the debt with maturities under three years, remained driven by increased market expectations in recent days of a Federal Reserve interest-rate hike in December. Drivers included stronger-than-expected employment data, hawkish Fed comments and higher-than-expected October inflation data.
Money markets currently price in a 88% probability of a 25-basis-point interest-rate raise and a 12% probability of a 50-basis-point hike at the December meeting, according to LSEG.
Still, with the Fed's Dec. 9 interest-rate decision some weeks ahead, the landscape might change.
"The December FOMC meeting feels so far away that enough can 'happen' between now and then to deter the Fed from hiking at all, even though the baseline view should be a single 25bp hike," said Thierry Wizman, global FX and rates strategist at Macquarie Group, in a note.
A number of things could prevent the Fed from hiking in December, or certainly deter a 50-basis-point hike, such as a U.S. government shutdown, and further declines in the price of oil on 'peace', and further sell-off in stocks, if the AI story worsens, he said.
On Thursday, the Treasury will auction $25 billion in 30-year bonds.
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