Treasury yields broadly slipped Friday morning as the market looked to recover from big moves in the prior session triggered by comments from Federal Reserve Chair Jerome Powell and a weak 30-year auction.
What’s happening
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The yield on the 2-year Treasury note
BX:TMUBMUSD02Y
was down 4.4 basis points at 4.978% from Thursday’s level of 5.022%, which was the highest since Oct. 31. -
The yield on the 10-year Treasury note
BX:TMUBMUSD10Y
fell 5.1 basis points to 4.578% from 4.629% on Thursday. -
The yield on the 30-year Treasury note
BX:TMUBMUSD30Y
dropped 6.6 basis points to 4.711% from 4.777% on Thursday.
What’s driving markets
Calm returned to the government-bond market on Friday, after a poorly-received Treasury auction of 30-year bonds in the prior session that triggered a sharp selloff in long-dated maturities and weighed on stocks.
Traders said Thursday’s auction may have been impacted by a ransomware attack against the U.S. arm of the Industrial & Commercial Bank of China this week, with Bloomberg News reporting that the attack caused disruptions across the Treasury market and some transactions failed to clear.
On Thursday, Federal Reserve Chairman Jerome Powell said the central bank was wary of “head fakes” from inflation and that interest rates may not be high enough to reach the central bank’s 2% target, raising the possibility of more action by policymakers. The next major inflation update arrives on Tuesday, with the October consumer price index.
What strategists are saying
The result of Thursday’s auction “doesn’t bode well for ongoing increases in 30-year issuance and has raised questions about how Yellen will choose to fund the deficit moving forward — an issue that will receive further clarity in the coming months as investors closely monitor the performance of the reopening auctions,” said BMO Capital Markets rates strategists Ian Lyngen and Ben Jeffery.
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