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Bond Report: 10-year Treasury yield pulls back from 14-year high

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Treasury yields pulled back early Tuesday, with the 10-year rate edging down from a more than 14-year high as investors assessed the outlook for Federal Reserve rate moves.

What yields are doing

The yield on the 2-year Treasury note
TMUBMUSD02Y,
4.410%

was at 4.462%, down from 4.498% at 3 p.m. Eastern

The 10-year Treasury yield
TMUBMUSD10Y,
4.086%

was 4.172%, down from 4.231% late Monday, which marked its highest close based on 3 p.m. levels since June 16, 2008, according to Dow Jones Market Data.

The yield on the 30-year Treasury bond
TMUBMUSD30Y,
4.248%

was at 4.324%, down from 4.36% late Monday, which was its highest since July 7, 2011.

Market drivers

Treasury yields have risen sharply in 2022 as the Federal Reserve has rapidly raised interest rates in its effort to rein in persistently high inflation. The selloff in Treasurys paused late last week after The Wall Street Journal reported Friday that Fed officials were headed toward another 75 basis point rate rise in November but were set to debate whether to reduce the size of its rate increases in December.

Yields bounced back on Monday, however, while investors continue to assess the outlook for rates and the economy, as well as a steady stream of earnings reports, including results from big tech heavyweights due this week.

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Investors will get a look at housing data at 9 a.m., while a consumer confidence reading is set for release at 10 a.m. An estimate on third-quarter U.S. gross domestic product is slated for Thursday, while closely watched inflation data — the personal consumption-expenditure price index — is due Friday. The core reading of the PCE gauge is the Fed’s preferred inflation indicator.

What analysts say

“Earnings outlooks from top-tier US tech stocks, which are due over the upcoming days, also have the power to add to the highly nervous environment in bond markets. All in all, chances are that the news and data flow will remain bad, but probably not bad enough to turn the tide in bond markets,” wrote economists at UniCredit Bank, in a note.

“However, it probably increases the likelihood of central banks softening their hawkish rhetoric slightly. A softening of hawkish rhetoric and a rhetorical pivot are clearly two different animals, but it will be interesting to hear whether the ever-increasing growth uncertainty receives slightly more attention in the press conferences from ECB President Christine Lagarde on Thursday and Fed Chair Jerome Powell next week,” they said. “Until then, we should get used to two-digit intra-day trading ranges in major bond markets.”

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