Borrowing costs climbed again, with the 10 year Treasury yield pressing to 4.818% before settling near 4.796% later on. The 30 year was roughly unchanged at about 5.267%, while the 2 year dipped by just under a basis point to 4.386%. A basis point is 0.01%, and bond prices tend to fall when yields rise.
Snapshot numbers showed the U.S. 10 Year Treasury at 4.80%, up 0.004 on the day. The 1 Month printed 3.739%, down 0.008, and the 1 Year was 4.161%, lower by 0.019. The 2 Year came in at 4.388%, off 0.006, and the 30 Year at 5.271%, up 0.004. Short bills were mixed, with the 3 Month at 3.872% marked UNCH and the 6 Month at 4.028%, down 0.006.
Investors have been asking for a bigger payoff to own medium and long term government bonds, and that pressure is showing up globally. With tensions in the Middle East fanning fears of persistent inflation, traders now anticipate that the U.S. and other regions will raise rates this month. As AJ Bell's head of markets Dan Coatsworth put it, "Investors are now staring directly into the eyes of an inflation monster that threatens to become stronger unless action is taken. Central banks typically raise interest rates to fight inflation, and market expectations for the scale of rate hikes continues to evolve." He added, "Bonds are reaching the point where certain investors may seek to lock in high yields caused by the latest market volatility. What might be holding them back is an expectation that yields could get even higher if rates go up fast and hard, meaning certain bond investors could be playing a waiting game before piling in."
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With inflation top of mind, fresh stats are getting extra scrutiny. According to ADP, U.S. private payrolls rose by 38,000 in August, a slowdown from July's upwardly revised 46,000 and below the 47,000 forecast in a Dow Jones survey. New York Fed President John Williams told CNBC he sees the latest jump in Treasury yields as a sign of a strong economy, but said he is still digesting recent figures, adding "we have to wait and see" on whether more rate increases are needed. In his words, "There's no clear signs right now whether monetary policy currently is sufficient to make sure we bring inflation back to target in the next year or two, or whether you need to see further action to do that."
