What are yields doing?
- The 10-year Treasury note yield
stood at 1.825%, compared with 1.826% at 3 p.m. Eastern on Wednesday.
- The 2-year Treasury note yield
was at 1.035% versus 1.022% on Wednesday afternoon.
- The yield on the 30-year Treasury bond
was 2.144%, compared with 2.137% on Wednesday.
- On Wednesday, the yields on the 10-year note and the 30-year bond saw their largest one-day drops since Dec. 13. The moves came after the 10-year had climbed to its highest since January 2020 on Tuesday, based on 3 p.m. Eastern levels, while the 2-year finished at its highest since February of that year.
What’s driving the market?
U.S. data released on Thursday showed that initial jobless claims jumped by 55,000 last week to a three-month high of 286,000, in a sign the omicron outbreak spurred more layoffs. Economists polled by The Wall Street Journal had forecast initial jobless claims to total a seasonally adjusted 225,000 in the seven days ended Jan. 15.
Meanwhile, the Philadelphia Fed’s manufacturing index rebounded in January, rising by 8 points to 23.2 — showing businesses are still growing despite omicron and persistent labor and supply shortages.
Figures on December existing home sales are set for release at 10 a.m. Eastern time. At 1 p.m., the Treasury Department will auction $16 billion in 10-year Treasury inflation-protected securities, or TIPS.
The selloff that’s driven Treasury yields higher in the new year took a breather on Wednesday. Expectations the Federal Reserve will be much more aggressive in raising interest rates and otherwise tightening monetary policy, in an effort to fight persistently high inflation, have been cited as the main driver for rising yields.
The Fed, which will hold its first policy meeting of 2022 next week, is expected to lay the groundwork for delivering a rate increase at its following meeting in March, with some investors even penciling in the prospect of a half percentage point rise in the fed-funds rate rather than a quarter-point increase.
Read: Fed to use upcoming policy meeting to get ducks in a row for March liftoff
Overseas on Thursday, China cut its benchmark lending rates. The move was widely expected after the central bank lowered the borrowing costs on medium-term loans earlier this week, as it attempts to support a slowing economy.
What are analysts saying?
“In the U.S., four rate hikes are currently priced in with roughly a 20% chance of a fifth. A 50 [basis point] hike at the March meeting is not priced in,” wrote analysts at UniCredit Bank, in a Thursday note. “While this is certainly quick, it is certainly not excessive given the many vocal voices urging the Fed to move faster. We therefore see further room on the upside until upcoming inflation data are released or the [Fed] press conference next Wednesday gives some more precise hints. The outlook for USTs (U.S. Treasurys) is therefore still vulnerable over the next couple of days.”