U.S. Treasury yields fell on Thursday morning, with 5-year and 30-year rates remaining to be reversed as investors digested the recent Federal Reserve meeting minutes.
The benchmark 10-year Treasury note yield fell 4 basis points to 2.5659% at 4:15 am ET. The yield on 30-year Treasury bonds dropped 2 basis points to 2.6046%, while the 5-year rate fell 6 basis points to 2.6381%. Yield goes up in price and 1 basis point equals 0.01%.
The Fed meeting minutes, released Wednesday afternoon, show that US Federal Reserve officials plan to shrink its balance sheet to $ 95 billion a month. Fed officials have also hinted that one or more 50-based-point interest rates could rise in the future.
This hockey tone from the Fed has seen a 10-year Treasury yield 3-year high. Investors are worried that the Fed’s more aggressive austerity measures in the face of rising inflation could actually hurt economic growth and lead to a recession.
In contrast to Treasury yields, investors sold short-term government bonds in favor of long-term debt, reflecting fears of a recession.
Simon Harvey, head of FX analysis at Monex Europe, told CNBC’s “Squawk Box Europe” on Thursday that the amount of money the Fed was withdrawing from the Treasury market was not necessarily “very aggressive.”
He hoped two consecutive 50-basis-point interest rates would be announced at the next Fed meeting.
After raising these two rates, Harvey said the Fed would consider whether it was enough to anchor inflation expectations, to see if it could continue to rise 25-basis-points.
Harvey suggested that if this is not enough to bring inflation under control, there could be a “revaluation at a higher terminal rate”, which is the end point of the Fed rate hike.
On Thursday, the Labor Department will release the number of initial unemployment claims filed for the week ending April 2, at 8:30 am ET. Economists expect 200,000 new unemployment insurance claims filed last week.
Auctions will be held for $ 35 billion 4-week bills and $ 30 billion 8-week bills.
