10-, 30-year Treasury yields end near 2-week highs amid optimism on U.S. economy

By Vivien Lou Chen

Long-term yields on U.S. government debt finished little changed on Friday, but remained near two-week highs following better news on the U.S. economy from the previous session.

What happened

The yield on the 2-year Treasury BX:TMUBMUSD02Y slipped 3 basis points to 3.573%, from 3.603% on Thursday. It finished marginally lower on a weekly basis, and recorded its third straight weekly decline. The yield on the 10-year Treasury BX:TMUBMUSD10Y fell 1.3 basis points to 3.727%, from around 3.740% on Thursday. For the week, the yield rose 7.8 basis points. The yield on the 30-year Treasury BX:TMUBMUSD30Y was marginally lower at 4.070%, down from 4.073% on Thursday. For the week, the yield rose 9.4 basis points.On Thursday, 10- and 30-year yields ended at their highest levels since Sept. 3-4.

What drove markets

Yields held steady on Friday, a day after the lowest initial jobless-benefit claims since May and an improving Philadelphia Fed gauge of regional business activity had pushed long-term rates to their highest closing levels in two weeks.

No major U.S. economic data was released on Friday.

Fed-funds futures traders priced in a 47.6% probability that the Fed will cut interest rates by 25 basis points from the current range of 4.75% to 5% at its next meeting on Nov. 7, according to the CME FedWatch Tool. The chance of a 50-basis-point rate cut was seen at 52.4%.

"With further 50bp rate cuts far from certain, we see the potential for a near-term retracement higher in yields even as dip buyers keep the move relatively contained," wrote Oscar Munoz, chief U.S. macro strategist, and his team at TD Securities.

"Market pricing for 2024 cuts may also decline if labor-market data continues to show relative stability. We remain buyers of dips and look for the curve to keep steepening," the TD Securities team added.

Outside the U.S., the Bank of Japan kept its benchmark rate unchanged at around 0.25%.

-Vivien Lou Chen

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09-20-24 1557ET

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