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Treasury yields see largest one-day increase since November
Published: Mar 1, 2017 3:59 p.m. ET
10-year yield tops 2.45%; 30-year yield climbs above 3%
By
JOSEPHADINOLFI
MARKETS REPORTER
Treasury yields on Wednesday notched their largest one-day increase since mid-November after the perceived probability of a March rate hike increased dramatically following hawkish remarks from several Federal Reserve officials.
The odds that the Fed will raise interest rates at its coming two-day meeting, which begins on March 14, climbed to around 70% on Wednesday, up from around 30% a day ago, according to the CME Group’s FedWatch tool.
Investors largely attributed the jump in yields to comments from New York Federal Reserve Bank President William Dudley and San Francisco Fed President John Williams, both of whom spoke on Tuesday.
Dudley told CNN that the case for raising interest rates has strengthening, triggering a sharp jump in the dollar and Treasury yields. Bond yields rise as prices fall. As the president of the New York Fed, Dudley holds a permanent vote on the central bank’s rate-setting committee. Williams is not a voting member this year, but said there will be “serious consideration” of a hike in March.
Dallas Fed President Robert Kaplan on Wednesday reiterated his view that rates should rise sooner rather than later.
The yield on the 10-year Treasury note TMUBMUSD10Y, +2.58% rose 10.4 basis points to 2.462%, while the yield on the two-year note TMUBMUSD02Y, +2.22%rose 7.2 basis points to 1.288%. The yield on the 30-year Treasury bondTMUBMUSD30Y, +2.12% climbed 10 basis points to 3.070%. It was the largest one-day rise for the two- and 10-year notes since Nov. 14. For teh 30-year bond, it was the largest since Nov. 9, the day after President Donald Trump’s upset electoral victory.
Some expressed incredulity that interest-rate futures markets, from which the rate-hike odds are derived, moved so swiftly to price in higher odds of a March hike.
“I am a bit surprised the market is so aggressive before yellen and fischer at end of the week and non farm next week,” said Marvin Loh, senior global markets strategist at BNY Mellon.
Turning to the economic data calendar, the Fed’s Beige Book suggested that business optimism has cooled in the wake of the presidential election.
Meanwhile, the PCE price index, a popular gauge of consumer-price inflation, showed prices in January accelerated at their fastest pace since 2012.
Investors also heralded Trump’s first speech to a joint session of Congress as a success, though they lamented the fact that it lacked any new details about his fiscal-policy agenda.
Ahead of the speech, investors had hoped that Trump would offer more information about the sweeping tax-cuts and $1 trillion infrastructure-spending plan that he promised during his campaign.
Read: Treasury yields rise as Fed’s Kaplan says next hike to come ‘in the near future’
Read: The border-adjusted tax could hurt some of the world’s most vulnerable economies
“Trump was Trumped by Dudley and the Fed,” said David Schnautz, fixed-income strategist at Commerzbank. “As long as we don’t get any curveballs from the labor market report or the speeches from Yellen and Fischer, we’ll be in good shape for a hike,” Schnautz said.
Fed Chairwoman Janet Yellen and Fed Vice Chairman Stanley Fischer are expected to deliver public remarks on Friday, their last before the Fed enters a quiet period ahead of its coming two-day policy meeting, which begins March 14.
The February jobs report is due on March 10.
A selloff in German bunds also helped boost Treasury yields as U.S. markets moved in sympathy, Schnautz said.
The yield on the 10-year bund TMBMKDE-10Y, +37.76% considered the European benchmark, climbed 7.3 basis points to 0.282%.
More from MarketWatch
Treasury yields see largest one-day increase since November
Published: Mar 1, 2017 3:59 p.m. ET
10-year yield tops 2.45%; 30-year yield climbs above 3%
By
JOSEPHADINOLFI
MARKETS REPORTER
Treasury yields on Wednesday notched their largest one-day increase since mid-November after the perceived probability of a March rate hike increased dramatically following hawkish remarks from several Federal Reserve officials.
The odds that the Fed will raise interest rates at its coming two-day meeting, which begins on March 14, climbed to around 70% on Wednesday, up from around 30% a day ago, according to the CME Group’s FedWatch tool.
Investors largely attributed the jump in yields to comments from New York Federal Reserve Bank President William Dudley and San Francisco Fed President John Williams, both of whom spoke on Tuesday.
Dudley told CNN that the case for raising interest rates has strengthening, triggering a sharp jump in the dollar and Treasury yields. Bond yields rise as prices fall. As the president of the New York Fed, Dudley holds a permanent vote on the central bank’s rate-setting committee. Williams is not a voting member this year, but said there will be “serious consideration” of a hike in March.
Dallas Fed President Robert Kaplan on Wednesday reiterated his view that rates should rise sooner rather than later.
The yield on the 10-year Treasury note TMUBMUSD10Y, +2.58% rose 10.4 basis points to 2.462%, while the yield on the two-year note TMUBMUSD02Y, +2.22%rose 7.2 basis points to 1.288%. The yield on the 30-year Treasury bondTMUBMUSD30Y, +2.12% climbed 10 basis points to 3.070%. It was the largest one-day rise for the two- and 10-year notes since Nov. 14. For teh 30-year bond, it was the largest since Nov. 9, the day after President Donald Trump’s upset electoral victory.
Some expressed incredulity that interest-rate futures markets, from which the rate-hike odds are derived, moved so swiftly to price in higher odds of a March hike.
“I am a bit surprised the market is so aggressive before yellen and fischer at end of the week and non farm next week,” said Marvin Loh, senior global markets strategist at BNY Mellon.
Turning to the economic data calendar, the Fed’s Beige Book suggested that business optimism has cooled in the wake of the presidential election.
Meanwhile, the PCE price index, a popular gauge of consumer-price inflation, showed prices in January accelerated at their fastest pace since 2012.
Investors also heralded Trump’s first speech to a joint session of Congress as a success, though they lamented the fact that it lacked any new details about his fiscal-policy agenda.
Ahead of the speech, investors had hoped that Trump would offer more information about the sweeping tax-cuts and $1 trillion infrastructure-spending plan that he promised during his campaign.
Read: Treasury yields rise as Fed’s Kaplan says next hike to come ‘in the near future’
Read: The border-adjusted tax could hurt some of the world’s most vulnerable economies
“Trump was Trumped by Dudley and the Fed,” said David Schnautz, fixed-income strategist at Commerzbank. “As long as we don’t get any curveballs from the labor market report or the speeches from Yellen and Fischer, we’ll be in good shape for a hike,” Schnautz said.
Fed Chairwoman Janet Yellen and Fed Vice Chairman Stanley Fischer are expected to deliver public remarks on Friday, their last before the Fed enters a quiet period ahead of its coming two-day policy meeting, which begins March 14.
The February jobs report is due on March 10.
A selloff in German bunds also helped boost Treasury yields as U.S. markets moved in sympathy, Schnautz said.
The yield on the 10-year bund TMBMKDE-10Y, +37.76% considered the European benchmark, climbed 7.3 basis points to 0.282%.
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