- US 10-year yields fell below 1.60% after hitting three-week highs at 1.65% earlier in the session.
- Investors may have to wait until Thanksgiving for a decision on the Fed chairmanship to be announced.
10-year US Treasury yields They fell back from the three-week highs at 1.65% that it touched earlier in Wednesday’s session, and finally fell below 1.60% for a daily decline of approximately 3.5bp. Yields fell along the curve, although the drop was steepest in the belly. 2s fell 2bp to 0.50%, 5s fell 3.5bp to 1.23%, 7s fell 4bp to less than 1.48% and 30s fell 2.5bp to fall below 2.0%.
There was no specific catalyst for the crash. Bond prices have been hit hard in recent sessions by positive surprises in US data and apparently seized the opportunity on Wednesday amid the lack of top-tier US data to rebound. some recently lost ground. As bond prices rise, yields fall. Wednesday’s US housing data was mixed and changed thinking about the current state of the US economy or the Fed’s policy debate. According to the White House, investors may have to wait until Thanksgiving (November 25) before a decision is announced on the nomination of the Fed chairman.
Yields saw a short-lived rally mid-session on the back of a $ 23bn 20-year bond auction at 18:00 GMT. The bonds were sold at a high yield of 2,065%, 1.4bp higher than when they were issued (that is, the 20-year yield before the start of the auction). That compares with an average tail of six auctions of 0.5 basis points, which some traders took as a sign of weaker demand for the 20-year bond. 20-year yields continue to trade above 30-year yields. According to Reuters, the 20-year bond is experiencing relatively less demand than other maturities since its reintroduction in May 2020.
5-year equilibrium inflation expectations, calculated by subtracting the 5-year real yield from the 5-year nominal yield, fell on Wednesday. Having been as high as 3.31% on Tuesday, they are currently trading at 3.24%. This is because the 5-year TIPS returns were unable to match the rally observed in the 5-year nominal returns, but traded within a -1.90-95% range and ended the session unchanged.
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