Yields for U.S. government debt on Friday were mostly heading higher for a fifth consecutive session ahead of what is expected to be the first increase of benchmark interest rates by the Federal Reserve at its policy meeting next week.
Investors also continued to watch fast-moving developments in the Ukraine, with Russian President Vladimir Putin, implying that he is making some progress in talks with Kyiv, even as Russia widens the war with bombing in western Ukraine.
What are yields doing?
-
The 10-year Treasury note yields
TMUBMUSD10Y,
2.013%
2.017%, rising compared with 2.008% on Thursday at 3 p.m. Eastern Time. -
The 2-year Treasury note rate
TMUBMUSD02Y,
1.735%
stands at 1.736%, up versus 1.717% a day ago. -
The 30-year Treasury bond yield
TMUBMUSD30Y,
2.388%
is at 2.383%, down slightly, compared with 2.392%. - The spread between the 2-year and 10-year notes, known as the yield curve, stands at around 30 basis points. The shape of the yield curve is viewed as an indicator of possible recession.
What’s driving the market?
Yields have climbed steadily this week, despite the persistence of the conflict in Europe, suggesting that worries about inflation and coming central bank interest-rate increases hold a greater sway with markets than the military clash.
The Federal Reserve’s two-day policy meeting starting next Tuesday is expected to result in a hike of Fed funds rates by 25 basis points, from the current range between 0% and 0.25%.
In geopolitics, President Vladimir Putin told his Belarusian counterpart Alexander Lukashenko that he had seen “certain positive shifts, and that sparked a more a positive tone in equity markets, which is weighing on so-called havens such as Treasurys and gold bullion.
Putin’s remarks come as the invasion of Ukraine by the Kremlin enters a third week, with troops tightening its circle around the capital city.
President Joe Biden is expected to announce Friday that the U.S. along with the European Union and Group of Seven countries, will end of normal trade relations for Russia over its invasion.
In U.S. economic reports, the University of Michigan consumer sentiment survey for March is due at 10 a.m. ET. On Thursday, consumer price data showed U.S. February consumer prices rose to 7.9%, a 40-year high, and some see that worsening due to the Russia-Ukraine war.
What strategists are saying
“Slower fixed income trading points to both the war’s transition to a more difficult phase and the puzzle of inflation and central bank policy to combat it,” wrote Jim Vogel, executive vice president at FHN Financial, in a note. “Market commentary discusses stagflation as though it is an economic cycle, but it is a label that was attached to a brief period in the US that was a precursor to recession,” he wrote.
