U.S. 10-year yields were five basis points higher on Wednesday at 1.50%, after falling five basis points on Tuesday. Two-year yields climbed three basis points to 0.60%, approaching the high of 0.65% reached last week, which was the most since March 2020.
“A week ago the Treasury market was preparing for a higher interest-rate environment next year,” said Michael O’Rourke, chief market strategist at JonesTrading Institutional Services in Stamford, Connecticut. “This Treasury squeeze in reaction to omicron caught investors off guard, and now Powell’s comments caught them off guard once again. That sets the stage for additional volatility for both bonds and stocks.”
U.S. payrolls data on Friday, inflation numbers next week, and the mid-December Fed meeting will play out against this febrile macro environment, as well as year-end liquidity constraints that can also promote volatility.
“The November data will show elevated payrolls and inflation and reveal the Fed is behind the curve, while omicron leaves the data horizon looking foggier,” said John Brady, managing director at RJ O’Brien, a futures brokerage in Chicago. “Fed policy meetings and data releases that provide an update about the likely trajectory of inflation will underpin volatility.”
-With assistance from Maria Elena Vizcaino, James Hirai and Libby Cherry.
This article was provided by Bloomberg News.