By Isabel Wang and Jamie Chisholm
U.S. Treasury yields ended in choppy trading on Wednesday as traders weighed a range of economic data for signals about the path of the Federal Reserve’s interest rate policy and the economy ahead of the Thanksgiving holiday.
What happened
The yield on the two-year Treasury note BX:TMUBMUSD02Y rose 2.7 basis points to 4.908%. The yield on the 10-year Treasury note BX:TMUBMUSD10Y slipped less than 1 basis point to end at 4.415%. The yield on the U.S. borrowing cost benchmark fell for five straight trading days. It was the longest streak of falling yields since April 5, according to Dow Jones Market Data. The yield on the 30-year Treasury note BX:TMUBMUSD30Y fell 3.2 basis points to end at 4.547%. It was the biggest one-day drop in yields since Nov. 16, according to Dow Jones Market Data.
What drove the markets?
Longer-term U.S. Treasury yields initially rose on Wednesday morning after the University of Michigan consumer survey showed Americans’ inflation expectations rose for a second straight month in November, as consumers appear concerned that stubborn inflation is far from over could be defeated.
However, longer-term yields fell slightly on Wednesday afternoon, settling at their lowest level in two months, according to Dow Jones Market Data.
Consumer sentiment still improved slightly toward the end of November, the University of Michigan said Wednesday. The final sentiment survey reading rose to 61.3 from 60.4 at the start of the month.
The Consumer Sentiment Survey shows how consumers feel about their own finances and the overall economy.
“Despite the upward revision in November, sentiment has still declined over the past four months,” Jeffrey Roach, chief economist at LPL Financial, wrote in an emailed comment on Wednesday. “The trend is clearly pointing downwards and suggests that consumers will be less willing to spend compared to previous months.”
Meanwhile, financial markets are unlikely to like the upward revision to 12-month inflation expectations to 4.5%, he added.
See: Consumer sentiment is improving, but Americans still worry about inflation
The 10-year Treasury yield has fallen nearly 46 basis points so far in November and is trading at a two-month low of about 4.4% this week on hopes that easing inflation means the Federal Reserve has stopped raising interest rates.
According to the CME FedWatch tool, markets have priced in a 95.2% chance that the Fed will leave interest rates unchanged in a range of 5.25% to 5.50% after its next two meetings on December 13 and January 31. is left.
Meanwhile, the chance of a 25 basis point rate cut at the subsequent meeting in March was estimated at 27.4%, unchanged from the previous meeting.
The U.S. bond market will be closed on Thursday for the Thanksgiving holiday and will close earlier on Friday.
-Isabel Wang -Jamie Chisholm
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11/22/23 1617ET
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