U.S. Treasury Yields Stabilize -- Update
By Sebastian Pellejero and Sam Goldfarb
U.S. government bonds showed signs of stabilizing Friday,
pushing yields lower a day after a chaotic session had sent them
The yield on the benchmark 10-year Treasury note settled at
1.459%, according to Tradeweb, down from 1.513% at Thursday's
close. The 10-year yield rose more than 0.3% in February for the
largest one-month rise since November 2016.
Yields, which rise when bond prices fall, climbed sharply on
Thursday as a weekslong selloff intensified -- fueled by bets that
the Federal Reserve will start raising interest rates earlier than
previously expected in response to what investors widely expect to
be a burst of economic growth and inflation later this year.
The 10-year yield logged its largest one-day gain since Nov. 9
during Thursday's session to finish at its highest closing level in
a year. The five-year yield, which is more sensitive to the
near-term outlook for interest rates, experienced its largest
one-day gain in more than 10 years.
Higher yields, though, helped investors regain their appetite
for Treasurys on Friday. Demand was also boosted by it being the
last trading session of the month, when many fund managers buy
Treasurys to match the adjustments in their benchmark bond
While many investors expected the 10-year yield to move higher
in 2021, the jump to 1.5% from around 1% in a matter of weeks is
raising some concerns. While Fed officials have said that the
yield's climb toward pre-pandemic levels marks a return to
normalcy, some investors worry their lack of concern could spur
"Thursday's rate move shows some signs of the dysfunction that
prompted Fed action in March ," wrote Bank of America
analysts in a Friday note. "However, the Fed will be challenged to
push back aggressively on the move, since, so far, they have
described it as reflecting 'healthy' factors."
After falling overnight, yields did tick higher early Friday
after the Commerce Department released new data showing U.S.
household income jumped 10% in January and consumer spending rose
2.4%, suggesting the economy is primed for a burst in growth this
Investors tend to sell Treasurys when they expect faster growth
and inflation, which lowers the value of bonds' fixed payments and
can prompt the Fed to raise interest rates. Their optimism has been
lifted recently by improving economic data, the promise of more
government spending and the expanding distribution of coronavirus
Friday's yield declines were led by longer-term bonds, with the
yield on the 30-year bond dropping to 2.187% from 2.303%
Despite the overall selling pressure, the gap between
shorter-term and longer-term yields has been shrinking in recent
sessions after expanding steadily earlier in the year. Along with
noting a shift in expectations about the timing of Fed rate
increases, some analysts said the gap between short and long-term
yields had simply become too large and was due for a
The gap, or spread, between yields on 5-year and 30-year
Treasurys finished Friday at 1.412 percentage points, down from
1.504 Thursday and the tightest spread in nearly a month.
Write to Sebastian Pellejero at email@example.com and
Sam Goldfarb at firstname.lastname@example.org
(END) Dow Jones Newswires
February 26, 2021 16:49 ET (21:49 GMT)
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