Treasuries in Retreat as Rate Hike Talk Continues

Yields ramped up another notch as Fedspeak conspired with mostly firmer data to keep at least three rate hikes on the table. Fed Chair Janet Yellen reprised her semi-annual policy testimony before the House and Philadelphia Fed President Patrick Harker, Boston Fed President Eric Rosengren and St Louis Fed President James Bullard addressed the expected pace of tightening. Data pointed in that direction as well, with hotter headline and core CPI, alongside firmer retail sales and Empire State manufacturing. The next wave of data had upticks in industrial production and business inventories, with a downdraft in National Association of Home Builders (NAHB).

Yields pulled back from highs after the uptick in business inventories and downdraft in the housing market data, while sources reported some call buying vs 10-year futures, along with earlier European fund selling in favor of buying euros. The 2-year yield steadied near 1.25% from 1.267%; the 5-year yield eased back under 2.0% from 2.02%; the 10-year yield pulled back to 2.50% from 2.523%; and the bond yield eased to 3.08% from 3.108% highs. Yields are 1.7-3.3 basis points higher along the curve, below earlier highs, still paced by the weak belly. The 2s-10s spread has steadied near +125 bp as a result.

Leave a Comment