10-year Treasury yield stages biggest weekly climb in three months

Long-term U.S. Treasury yields climbed sharply this week, despite trading lower on Friday, following testimony from Federal Reserve Chairman Jerome Powell, who entrenched expectations for rate-cuts at the end of this month.

What are Treasurys doing?

The 10-year Treasury note yield TMUBMUSD10Y, -0.86%  was down 1.6 basis points to 2.106% on Friday, trimming its week-long rise to 6.2 basis points. The benchmark bond yield marked its biggest weekly rise since April 5.

The 30-year bond rate TMUBMUSD30Y, -0.57%   was down 0.8 basis point to 2.634%, paring its week-long climb to 8.6 basis points.

The 2-year note yield TMUBMUSD02Y, -1.26%   fell 1.8 basis points to 1.834%, extending a drop for the week to 3.6 basis points.

What’s driving Treasurys?

The Treasurys market has seen a week-long rise in yields, after falling earlier this month to the lowest levels in two years in expectation of Fed interest rate cuts. But a stronger-than-expected rise in consumer prices in June reported on Wednesday, along with weak demand at Treasury auctions, pushed up yields after Powell confirmed the likelihood of a cut in the federal funds rate later this month.

See: An economy gone ‘mad?’ The Fed is going to cut interest rates despite record stock prices, low unemployment

Elsewhere, eurozone industrial production rose for the first time since January, jumping 0.9% in May. The export-dependent eurozone has struggled under the pressure of lingering trade policy tensions, with the U.S. and China having yet reached a deal to end their longstanding trade dispute.

The German 10-year government bond yield TMBMKDE-10Y, +20.24%   rose 1.5 basis points to negative 0.25%, while the French 10-year bond yield TMBMKFR-10Y, +152.69%   climbed 3.9 basis points to 0.06%.

What did market participants’ say?

“Positive surprises in U.S. employment and inflation have finally put a break on the global bond rally. But an unwaveringly dovish Fed is looking past the latest data points and has essentially pre-committed to a July rate cut. Against the backdrop of a lackluster growth and still-muted inflation, the current rise in global yields might be short-lived,” wrote Michael Chang, a rates strategist at Société Générale.

What else is on investors’ radar?

In economic data, U.S. producer prices rose 0.1%, above the 0.1% decrease forecast from economists polled by MarketWatch.

As for the Federal Reserve, Chicago Fed President Charles Evans said he expected two rate-cuts this year to push inflation above the U.S. central bank’s 2% target.

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