- U.S. Treasury yields were unchanged early Wednesday, with the 10-year at 5.1211%, the 2-year at 4.7889% and the 30-year at 5.4320%. Investors are holding positions while they wait for fresh economic data ahead of the Federal Reserve’s Oct. 28 rate decision.
- Those levels put the gap between 2-year and 10-year yields at about 33 basis points and the 30-year roughly 31 basis points above the 10-year. With the 10-year above 5%, the benchmark for mortgages, auto loans and credit card debt is keeping borrowing costs high across the economy.
- Oil is the main pressure point. West Texas Intermediate futures rose 0.86% to $98.66 a barrel after fresh missile strikes on tankers in the Strait of Hormuz and on Saudi energy facilities, which feeds directly into the inflation outlook the Fed is weighing.
- Two data releases set up the next move. The Mortgage Bankers Association’s weekly 30-year fixed rate, last at 7.5% after a 1 basis point rise in the week ended Oct. 9, is due Wednesday, followed by Thursday’s initial jobless claims, which rose by 1,000 to 199,000 in the prior week.
What Happened?
Treasury yields held steady across the curve on Wednesday morning as traders looked for new signals on the U.S. economy. The 10-year yield sat at 5.1211%, the 2-year at 4.7889% and the 30-year at 5.4320%. Energy prices moved higher, with WTI crude up 0.86% to $98.66 a barrel on renewed concerns over oil supplies from the Middle East. Mortgage rate data from the Mortgage Bankers Association is due later Wednesday, and the Labor Department will publish jobless claims for the week ending Oct. 17 on Thursday.
Why It Matters?
A flat session at these levels is still a statement about where the bond market sits, with the 10-year above 5% and the 30-year above 5.4% a week before the Fed decides on rates. Traders are balancing domestic data against geopolitical risk, and oil near $99 on attacks on tankers and Saudi facilities keeps inflation risk front and center. The 2-year, which tracks expectations for Fed policy most closely, holding near 4.79% suggests the market is not repricing the near-term path ahead of the meeting. For borrowers, mortgage rates at 7.5% and jobless claims below 200,000 describe an economy where demand for labor is holding up while credit stays expensive. That combination gives the Fed little reason to ease.
What’s Next?
Wednesday’s mortgage rate reading and Thursday’s jobless claims are the next data points for bond traders. A move in claims away from the 199,000 level would be the clearest signal on whether the labor market is shifting. Oil supply through the Strait of Hormuz remains the biggest external risk to yields, given its effect on inflation expectations. The Fed’s Oct. 28 decision is the main event, and the 2-year yield is the gauge to watch for any repricing beforehand.
Affected Tickers and Coins: ZN, ZT, ZB, CL
Source: CNBC
