2023-11-17 11:08:28
U.S. Treasury yields continued to fall on Friday (17th) as investors bet that the Federal Reserve’s interest rate hikes may eventually come to an end.
5:57 a.m. ET,10-Year Treasury Bond YieldIt fell 5.6 basis points to 4.389%. The 2-year Treasury yield fell 3.7 basis points to 4.805%.
There is an inverse relationship between yield and price, with 1 basis point equal to 0.01 percentage point.
Data this week showed that persistently high inflation may finally be easing.
The producer price index (PPI) released on Wednesday (15th) showed a decrease of 0.5% in October, while economists had expected a slight increase. This was the index’s biggest drop since April 2020.
The October consumer price index (CPI) released the day before was also lower than expected. The core CPI annual rate excluding food and energy fell to a 2-year low of 4%; up 0.2% from the previous month.
Weak oil prices have also added to the feeling that inflation is likely to remain low. Crude oil is likely to fall for a fourth consecutive week.
It all reinforces hopes that the Fed may decide to stop raising interest rates and fuels debate over when to cut rates for the first time.
Deutsche Bank analyst Henry Allen wrote in a note: “Speculations about a dovish turn have grown over the past 24 hours, as a series of negative data heightened concerns that the Fed has completed its hike. The feeling of breathing.”
“Time will tell whether this proves that, but at least for now, it means that the 2-year Treasury yield is almost as low as it has been since August, and investors are starting to anticipate a more aggressive 2024,” he said. A rate cut of just under 100 basis points is now priced in at the Fed’s December meeting.”
Housing starts and building permit data for October will be released on Friday. No Treasury auction is scheduled.
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