Treasury yield on 30-year US government debt at 5.5% hits new high since 2004 | Today’s news
Yields on 30-year U.S. government debt hit fresh multi-year highs on the final day of a busy week after a measure of consumer sentiment beat economists’ estimates.
The yield on the 30-year Treasury note, which hit its highest level since 2004 on Thursday, rose as much as five basis points to 5.53 percent. Even at the beginning of July, it was below 5 percent. The yield on the 10-year note also hit a fresh multi-year high of more than 5.22 percent.
“There are no real technical levels that people can hold on to, and it leaves things in a bit of a vacuum,” said Izaac Brook, US rates strategist at RBC Capital Markets. “That allows yields to keep going higher and higher.”
Long-term Treasury yields rose on Friday, even as yields on short-term debt – which are more sensitive to a shift in expectations about the Federal Reserve raising interest rates aimed at curbing inflation – fell.
The 30-year yield was just above 5.50 percent on Friday afternoon in New York, up about three basis points on the day, while the two-year was about seven basis points lower.
“There are too many prices on the front end,” said Monty Gandhi, rates strategist at SMBC Group. “Short-term investors want to buy the front and think another bearish or higher expression should flow into the belly.”
Short-term yields hit multi-year highs earlier this week on expectations that the Fed’s September rate hike, the first since 2023, will be the first of several as the US war in the Middle East supports energy prices.
Oil prices
Friday’s rise in long-dated yields also contradicted a drop in oil prices, which have been the dominant driver of daily changes in Treasury yields during the war-related supply shock. U.S. benchmark West Texas Intermediate futures settled up 2.3% at $92.41.
“Because rate hikes are now being made in direct response to higher energy prices, there is no clear short-term upper limit for price increases that the market can set,” Citigroup economist Andrew Hollenhorst said in a report.
Interest rate strategists at Morgan Stanley raised their forecasts for Treasury yields based on the firm’s recently revised forecast for further Fed tightening, noting that market pricing in the Fed’s path explains most of the movement in 10-year yields.
Rising Treasury yields reflect not only the potential for higher energy prices to keep broader measures of inflation high, but also signs that the U.S. economy and companies are coping well with higher interest rates. A gauge of consumer sentiment released by the University of Michigan on Friday held up better than economists expected, despite falling to a four-month low in September.
The yield curve
Friday’s yield moves widened the gap between short-term and long-term yields, with key segments such as 2-year to 10-year and 5-year to 30-year bonds rebounding from more than a year lows hit earlier this week as short-term yields initially rose more.
Activity in Treasury futures was consistent with traders taking profits from these bets. For example, a pair of block trades involving the 5-year bond and Ultra Bond futures contracts that were executed simultaneously shortly before 10:00 a.m. New York time were executed at price levels that indicated the 5-year was bought and the Ultra Bond sold.
