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Saturday, January 28, 2023

Treasury yields dip, giving back some of Monday’s jump

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U.S. Treasury yields fell slightly on Tuesday, giving back some of the gains seen in the previous session sparked by economic data that suggested the Federal Reserve may need to hike rates for longer.

The yield on the benchmark 10-year Treasury fell by roughly 5 basis points to trade at 3.553%. The 2-year Treasury yield was last down by around 3 basis points to 4.364%.

Yields and prices move in opposite directions and one basis point equals 0.01%.

The move in yields followed a slew of economic data releases that hinted at a robust economy despite the Fed’s rate hiking campaign.

On Monday, Treasury yields jumped as November ISM Services data came in higher than expected, and showed that economic activity increased at a faster pace in November than in October. Friday’s nonfarm payrolls report also exceeded expectations.

Some investors believe that this resilience could mean that the central bank needs to hike rates further, or keep them higher for longer to slow inflation.

So far this year, the Fed has implemented four consecutive 75 basis point rate hikes, prompting concern among many investors about the pace of rate hikes dragging the U.S. economy into a recession.

Commentary from Fed officials in recent weeks suggests rates will go higher still, although the central bank is widely expected to announce a 50 basis point hike at the conclusion of its December policy meeting next week.

On Tuesday, investors will be paying close attention to the release of balance of trade data.



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