Bond Report: Treasury yields hold near multiyear highs to start second week in February


Yields for government debt on Monday were edging slightly lower after hitting the highs note seen in years on Friday, following a better-than-expected jobs report.

Investors are looking ahead to important data on consumer prices on Thursday and auctions of government debt this week, which could help to provide further color around appetite for Treasurys.

What are yields doing?
  • The 10-year Treasury note TMUBMUSD10Y, 1.921% yields 1.927%, slightly down from 1.930% on Friday at 3 p.m. Eastern Time, which marked the highest yield since Dec. 23, 2019.
  • The 2-year Treasury note TMUBMUSD02Y, 1.304% yields 1.316%, edging lower from 1.322% at the end of last week, where rates hit their highest level since Feb. 21, 2020, after the biggest daily yield gain since March 10, 2020, according to Dow Jones Market Data.
  • The 30-year Treasury TMUBMUSD30Y, 2.219%, aka the long bond, was yielding 2.229%, compared with 2.232% on Friday afternoon.

What’s driving the market?

Yields are steady but remain elevated to start the second week of February after employment data on Friday appeared to support an aggressive path monetary policy tightening by the Fed, which is focused on combating pricing pressures.

Friday’s data released by the Labor Department showed that the U.S. economy added 467,000 jobs in January, well above economists’ expectations for an addition of just 150,000 jobs, with some projecting losses for January due to the omicron variant surge.

Treasury yields jumped after the data.

However, rises in real yields — those adjusted for inflation — may suggest that some investors are bracing for a cool down in inflation measures. The yield on the 30-year Treasury inflation-protected securities, or TIPS, a proxy for real yields on the long bond, rose above break-even levels for the first time in about eight months, traders said.

Looking ahead, investors will watch for the CPI report on Thursday for further evidence of inflation. Auctions for 3-year Treasury notes TMUBMUSD03M, 0.232% on Tuesday, 10-year debt on Wednesday and a sale of long bonds on Thursday after inflation data will come into focus this week.

Investors, meanwhile, are watching developments between Russia and Western nations, with the prospect of conflict in Ukraine growing.

White House national security adviser Jake Sullivan told Fox News on Sunday that “any day now, Russia could take military action against Ukraine or it could be a couple of weeks from now,” but still left room for the possibility of a diplomatic solution. “We are in the window,” the adviser said.

What strategists are saying

“We have little economic data until we see CPI on Thursday. We do have Treasury supply in 3yr, 10yr, and 30yr this week. On the geo-political front a Russian invasion of Ukraine is likely according to Jake Sullivan, the National Security Advisor to President Biden,” wrote managing director Tom di Galoma of Seaport Global Holdings, in a daily note.

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