Bond Report: Treasury yields jump after Washington averts shutdown

by | Oct 2, 2023 | Stock Market

Treasury yields resumed their climb Monday morning after the U.S. government averted a weekend shutdown, removing one obstacle to the Federal Reserve’s decision-making ability at its next meeting.

What’s happening
The yield on the 2-year Treasury
advanced 6 basis points to 5.106% from 5.046% on Friday. The 2-year rate was heading for Thursday’s closing level of 5.148%, the highest since July 2006. Yields move in the opposite direction to prices.

The yield on the 10-year Treasury
rose 6.9 basis points to 4.641% from 4.572% on Friday. It’s on the way to its highest level since Oct. 16, 2007.

The yield on the 30-year Treasury
gained 4.1 basis points to 4.750% from 4.709% on Friday. The 30-year rate is heading for its highest since February 2011.

What’s driving markets Traders had gone into the weekend expecting a U.S. government shutdown that —by some analysts’ estimates — could have knocked 0.1 to 0.2 percentage points off of quarterly economic growth per week, and might have hindered the Federal Reserve’s ability to raise interest rates again in November.But on Saturday night, the Senate voted to advance a short-term stopgap funding measure, averting a government closure for now. The development pushed the 2-, 10-, and 30-year Treasury yields back toward some of the highest levels in at least a dozen years.

Markets are pricing in a 30.9% probability that the Fed will hike interest rates by 25 basis points to a range of 5.5% to 5.75% on Nov. 1, and a 38.8% chance that will happen by December, according to …

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