Treasury yields bounce to begin week

Treasury yields bounced early Monday, with the 10-year rate rising from a roughly three-week low, as investors monitored China’s reopening and awaited remarks this week by Federal Reserve Chair Jerome Powell and a round of U.S. inflation data.

Price action
  • The yield on the 2-year Treasury note
    TMUBMUSD02Y,
    4.270%
    rose 0.4 basis points to 4.27%, after ending Friday at its lowest since Dec. 16, based on 3 p.m. Eastern levels, according to Dow Jones Market Data. Yields and debt prices move opposite each other.

  • The yield on the 10-year Treasury note
    TMUBMUSD10Y,
    3.594%
    was up 2.9 basis points at 3.592%, up from its lowest since Dec. 16.

  • The 30-year Treasury bond
    TMUBMUSD30Y,
    3.725%
    yielded 3.737%, up 3.4 basis points, after ending Friday at its lowest since Dec. 19.

Market drivers

Treasurys rallied last week, dragging down yields, after a sharp drop in the Institute for Supply Management’s services index into territory that signals a contraction in activity, underlining fears the economy is sliding toward recession.

Jobs data on Friday showing that wage growth slowed in December boosted expectations the Federal Reserve will slow the pace of rate increases in 2023.

Meanwhile, China’s reopening from strict COVID-19 restrictions was fueling a rally in oil prices early Monday, while providing a lift for global equities.

Fed Chair Jerome Powell is due to speak Tuesday, while the December consumer-price index reading is due on Thursday.

What analysts say

“The most prominent data release this week is the U.S. inflation report on Thursday. With the market momentum constructive, a mixed release (consensus estimate is for the headline figure to be at an encouraging 0.0% mom but for the core reading to be a disappointing 0.3% mom) might be largely neutral for the long end,” wrote economists at UniCredit Bank in a Monday note.

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