United States Treasury yields experienced a decline as traders assessed differing opinions from Federal Reserve officials, creating uncertainty regarding the trajectory of interest rate cuts. Yields increased by approximately three basis points across various tenors. The yield on two-year notes, closely mirroring expectations for Federal Reserve policy, climbed to 3.60 per cent in New York on Wednesday (Thursday AEST). This movement remained consistent following a five-year note auction, which saw yields rise by approximately 0.3 basis points compared to pre-sale levels.
As of 2.30pm, the yield on the benchmark US 10-year note had risen by 4 basis points to 4.14 per cent. Since September 17, when the Federal Reserve implemented its initial interest rate cut of the year, Treasury yields have retreated from multi-month lows. Federal Reserve chairman Jerome Powell commented on Tuesday that the central bank is facing the dual challenge of a weakening labour market and the potential for increased inflation, factors that will influence future policy decisions.
Treasury Secretary Scott Bessent voiced his dissatisfaction on Wednesday with Powell’s perceived lack of a clear plan for rate reductions. According to Gregory Faranello, head of US rates trading and strategy for AmeriVet Securities, there’s a sense of internal conflict within the committee.
The bond market was also affected by corporate bond issuances, including a significant bond sale by Oracle. Oracle, a software maker, is seeking to borrow $US18 billion from the US investment-grade bond market on Wednesday. This represents the second-largest debt sale observed this year.
