U.S. Treasury yields mostly rose in Asian trade on Friday as inflationary pressures keep expectations for further Federal Reserve interest-rate hikes strong, but the pace of the selloff slowed compared with Thursday.
The yield on two-year Treasurys, which were the hardest hit by Thursday's selloff, was stable at 4.861%, while the 10-year Treasury yield rose 2.6 basis points to 5.128%, according to Tradeweb.
"Persistent inflation is keeping global rate markets under pressure, but the risks are increasingly uneven," Societe Generale rates strategists wrote in a note. "The Fed has greater reason than the European Central Bank to remain hawkish, as U.S. inflation is broader-based while euro-area pressures remain largely energy-led," they said.
On Thursday, Cleveland Fed President Beth Hammack said she prefers smaller, steadier movements in monetary policy because they make it easier for businesses and households to plan. San Francisco Fed President Mary Daly said: "My bias is that further tightening will be needed because you just see this consistent pressure on inflation that isn't simply in the sectors that are most directly affected by tariffs or oil."
Money markets price in a 87% probability of a 25-basis-point Fed interest-rate increase in December, while they assign a 13% probability to a 50-basis-point hike, according to LSEG data.
Jefferies sticks to its expectations for a 25-basis-point tightening in December.
"But beyond December, the outlook will depend on the war and the oil prices," global economist Mohit Kumar said in a note. "If the current state of 'no war no peace' continues for the next couple of months, we could see the case for a Fed hike in January."
Friday's data to watch include the producer price index for October, which is expected to have accelerated to 6.6% on the year from 6.3% in September, according to The Wall Street Journal's poll of analysts. The data is watched in particular in light of higher-than-expected October consumer price inflation released earlier this week.
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