Treasuries declined for a fourth consecutive day, pushing yields to multi-week highs amid concerns that rising crude oil prices will exacerbate inflation. Yields across various maturities increased by 2 to 5 basis points, spurred by the US benchmark crude oil futures contract surpassing $US78 a barrel, a level not seen since June. The recent climb from under $US70 this week, following the US attack on Iran on February 28, has led traders to speculate that any Federal Reserve interest-rate cuts may be delayed this year.
US government bond yields remained elevated following the release of the weekly US jobless claims data, which came in slightly below economists’ estimates. Although the forthcoming February employment data is expected to show a slowdown in job creation, the indication of a robust labour market presents another obstacle to bets on Federal Reserve interest-rate reductions, which would typically benefit bonds. “The market is not going to trade on economic data today,” remarked John Brady, managing director at RJ O’Brien. “It remains about the widening war in the Middle East and the energy markets.”
Yields on two-year notes, which are more closely correlated with Fed rate adjustments than longer-term notes, rose by nearly 5 basis points to almost 3.6 per cent, reaching their highest point since January 28. They have increased by approximately 20 basis points this week, marking their most significant rise since April. The 10-year yield hovered around 4.14 per cent, its highest since February 12. Richmond Fed president Tom Barkin commented on Thursday that the risk of inflation stemming from fuel prices has implications for monetary policy, adding that the trend in consumer prices “certainly puts pause to any conclusion that we’re done fighting this.”
