U.S. Treasury Yields Steady
26 February 2021 - 5:42PM
Dow Jones News
By Sebastian Pellejero
U.S. government bonds showed signs of stabilizing Friday, with
yields swinging between small gains and declines after rising
sharply a day earlier.
The yield on the benchmark 10-year Treasury note recently traded
around 1.501%, according to Tradeweb, down from 1.513% at
Thursday's close.
Yields, which rise when bond prices fall, soared on Thursday as
a weekslong selloff intensified -- fueled by bets that the Federal
Reserve will start raising interest rates earlier than previously
expected in response to what investors widely expect to be a burst
of economic growth and inflation later this year.
The 10-year yield logged its largest one-day gain since Nov. 9
during Thursday's session to finish at its highest closing level in
a year. The five-year yield, which is more sensitive to the
near-term outlook for interest rates, experienced its largest
one-day gain in more than 10 years.
Selling, though, abated Friday, as the higher yields attracted
buyers.
While many investors expected the 10-year yield to move higher
in 2021, the jump to 1.5% from around 1% in a matter of weeks is
raising some concerns. While Fed officials have said that the
yield's climb toward pre-pandemic levels marks a return to
normalcy, some investors worry their lack of concern could spur
more selling.
"Thursday's rate move shows some signs of the dysfunction that
prompted Fed action in March [2020]," wrote Bank of America
analysts in a Friday note. "However, the Fed will be challenged to
push back aggressively on the move, since, so far, they have
described it as reflecting 'healthy' factors."
After falling overnight, yields did tick higher early Friday
after the Commerce Department released new data showing U.S.
household income jumped 10% in January and consumer spending rose
2.4%, suggesting the economy is primed for a burst in growth this
year.
Investors tend to sell Treasurys when they expect faster growth
and inflation, which lowers the value of bonds' fixed payments and
can prompt the Fed to raise interest rates. Their optimism has been
lifted recently by improving economic data, the promise of more
government spending and the expanding distribution of coronavirus
vaccines.
Write to Sebastian Pellejero at sebastian.pellejero@wsj.com
(END) Dow Jones Newswires
February 26, 2021 12:27 ET (17:27 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.