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bond-report:-10-year-treasury-yield-carves-out-1-month-low-after-fed’s-may-minutes-confirms-rate-hike-expectations
bond-report:-10-year-treasury-yield-carves-out-1-month-low-after-fed’s-may-minutes-confirms-rate-hike-expectations

Breaking

Bond Report: 10-year Treasury yield carves out 1-month low after Fed’s May minutes confirms rate-hike expectations

Treasury yields were little changed to lower on Wednesday after minutes of the Federal Reserve’s May 3-4 policy meeting reinforced expectations that policy makers would hike rates by a half-point at a time during coming meetings.

The 10-year rate carving out a fresh one-month low below 2.75%

What yields are doing
  • The yield on the 10-year Treasury note
    TMUBMUSD10Y,
    2.750%

    declined 1.2 basis points to 2.746% from 2.758% at 3 p.m. Eastern on Tuesday. That’s the lowest level since April 13, based on 3 p.m. yields, according to Dow Jones Market Data.

  • The 2-year Treasury note yield
    TMUBMUSD02Y,
    2.496%

    declined 2.7 basis points to 2.5% Tuesday afternoon, after accounting for new issue levels.

  • The yield on the 30-year Treasury bond
    TMUBMUSD30Y,
    2.974%

    fell less than 1 basis point to 2.965% from 2.971% late Tuesday. That’s the lowest yield since April 29.

What’s driving the market

Treasury yields were mostly unchanged to slightly lower on Wednesday after the Fed’s May meeting minutes were released.

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Minutes of the central bank’s May 3-4 meeting showed that most policy makers felt 50 basis point rate hikes would likely be appropriate at the next couple of meetings. In addition, a number of participants suggested price pressures “may no longer be worsening.”

Investors remain focused on inflation and the debate over the Federal Reserve’s ability to bring price pressures under control without sinking the economy into recession. The central bank, which is set to begin unwinding its balance sheet on June 1, delivered a half percentage point rate increase earlier this month following a more traditional quarter-point, or 25 basis point, hike earlier this year. Fed officials have signaled at least two more half-point rises are in store.

What analysts are saying
  • “The Federal Reserve minutes indicated that it was important to move expeditiously to a more neutral monetary policy stance. They also noted that a restrictive stance of policy may well become appropriate depending on the evolving economic outlook and the risk to that outlook,” said Anthony Denier, CEO of Webull, a trading platform.

  • “This possibility of a more restrictive policy stance is new information and does not imply a soft landing,” Denier wrote in an email to MarketWatch. “The Fed is moving slowly because when it talks tough, the market ramps up. Still, I don’t think it dramatically changes the outlook and I don’t see the Fed backing off.”

  • Dean Smith, chief strategist at FolioBeyond, said “market reaction to the Fed minutes is quite muted, as it is old news. Events have moved past the data available to the Fed at the time of their last meeting on May 3-4. That was a lifetime ago as it relates to the evolution of the highly volatile markets over the past several weeks.”

  • “The minutes refer to an extremely strong labor market. Since then, a number of major employers have announced significant layoffs. The minutes also are quite benign with respect to the housing market. Meanwhile, just yesterday we saw horrific numbers for new home sales,” Smith told MarketWatch by email. “The sad reality is that the Fed remains willingly, steadfastly—almost obstinately—behind the curve.”

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