10-year Treasury yield slips below 1.4% after busy week for central banks

Treasury yields fell at the long end Friday and held near unchanged at the short end, as a week packed with moves by major central banks draws to a close.What are yields doing?
The 10-year Treasury note
TMUBMUSD10Y,
1.391%
yielded 1.396%, down from 1.422% at 3 p.m. Eastern on Thursday and trading below the 1.40% threshold for the first time since Dec. 6, according to FactSet.

The 2-year Treasury yield
TMUBMUSD02Y,
0.617%
was at 0.617%, little changed from 0.619% Thursday afternoon.

The yield on the 30-year Treasury bond
TMUBMUSD30Y,
1.826%
fell to 1.831%, down from 1.86%.

What’s driving the market? New York Federal Reserve Bank President John Williams told CNBC Friday that inflation is “obviously too high” right now but that he didn’t see any benefit in further accelerating the tapering process after the Fed decided on Wednesday to accelerate its wind-down of asset purchases. Williams said the decline in yields at the long end appeared to be driven largely by COVID-related news.

Investors will also hear from Fed Gov. Christopher Waller, who is scheduled to talk about the economic outlook at 1 p.m. Eastern, Earlier Friday, the Bank of Japan on Friday said it would next year begin unwinding some of the emergency stimulus measures put in place due to the COVID-19 pandemic, but stuck with its ultra-easy stance on monetary policy. “I don’t think the BOJ will move toward normalizing monetary policy like in the U.S. and Europe,” said BOJ Gov. Haruhiko Kuroda. The European Central Bank on Thursday affirmed it would end its emergency program of asset purchases in March, while temporarily boosting the size of a longer-running asset-buying program beginning in the second quarter of next year. The Bank of England, meanwhile, became the first major central bank to raise interest rates, unexpectedly lifting its benchmark by 15 basis points to 0.25%. The Fed’s new timetable announced on Wednesday will see the central bank ending bond purchases by March as policy makers penciled in three rate increases in 2022. Treasury yields fell Thursday, a move that was seen as counterintuitive given that major central banks were seen becoming less accommodative. The moves were seen in part reflecting worries that central banks may be tightening into a weaker global economic environment, enhanced by uncertainty over the implications of the spread of the omicron variant of the coronavirus that causes COVID-19. Sign up for our Market Watch Newsletters here.What are analysts saying? “The stage is set for an extension of the tale of two markets; the front end beholden to U.S. fundamentals as 10s and 30s are driven by global macro,” said Ian Lyngen and Ben Jeffery, strategists at BMO Capital Markets, in a note. “The depths to which the yield curve can flatten will be a function of the Fed’s willingness to move forward with rate normalization in the event the global outlook dims further.”

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