U.S. Treasury yields retreated on Friday morning, with the 10-year rate falling to hover above 1.79%.
The yield on the benchmark 10-year Treasury note fell 4 basis points to 1.7919%. The yield on the 30-year Treasury bond moved 3 basis points lower to 2.1103%. Yields move inversely to prices and 1 basis point is equal to 0.01%.
The 10-year Treasury yield hit 1.9% in early trading on Wednesday, with investors focused on the Federal Reserve’s timeline for raising interest rates and broadly tightening monetary policy.
A pullback in central bank economic support measures, along with concerns around rising inflation, also prompted investors to sell out of two-year Treasurys, which indicate short-term interest rate expectations. The two-year yield topped 1% for the first time in two years earlier in the week. It traded at 1.024% in early trading on Friday.
Mike Harris, founder of Cribstone Strategic Macro, told CNBC’s “Squawk Box Europe” on Friday that the “bond market is no longer the world’s greatest economist, it’s effectively taking leadership from the Fed.”
Harris explained that while the debate over whether inflation is transitory was being reflected in Treasury trading, the “bond market doesn’t have a way to fully price it in, until the Fed gets there.”
“So I wouldn’t read too much into market moves unless we saw the long bond falling substantially and persistently, which seems totally improbable at this stage,” he added.
The German 10-year bund yield traded in positive territory for the first time in nearly three years on Wednesday morning. It has since fallen back to trade at 0.048% on Friday morning.
There are no major economic data releases or Treasury auctions scheduled for Friday.
Investors will now be turning their attention to the Fed’s January two-day policy meeting, set to start on Tuesday.
In a note on Friday, ING strategists said that they believed that Fed could well “announce an end to its asset purchases already at next week’s meeting, setting the stage for a first interest rate hike in March.”
