U.S. Treasury yields rose early Thursday as investors digested a flurry of interest rate increases by global central banks, including a larger-than-expected hike by the Bank of England in response to stubborn inflation pressures.
What yields are doing
-
The yield on the 2-year Treasury note
TMUBMUSD02Y,
4.739%
rose to 4.731%, up from 4.707% at 3 p.m. Eastern on Wednesday. -
The 10-year Treasury note yield
TMUBMUSD10Y,
3.743%
was at 3.741%, rising from 3.722% Wednesday afternoon. -
The yield on the 30-year Treasury bond
TMUBMUSD30Y,
3.830%
was 3.825% versus a late Wednesday level of 3.807%.
Market drivers
Investors were weighing a round of rate hikes by global central banks, underlining the challenge faced by policy makers in bringing down stubborn inflation. The Bank of England raised its key rate by 50 basis points, or half a percentage point, a larger than expected move.
Most economists expected a quarter-point move from the Bank of England. It’s the 13th consecutive increase after starting with rates close to zero in December 2021 and brings the benchmark to 5% as policy makers battle the highest inflation in the Group of Seven. The annual rate of price gains held at 8.7% in May, more than four times higher than the BOE’s 2% target.
The BoE move followed a half-point hike earlier Thursday from Norway’s central bank, which warned that a further hike may be needed in the near term. The Swiss National Bank also hiked interest rates on Thursday.
Meanwhile, Turkey’s central bank, in a reversal led by newly appointed Gov. Hafize Gaye Erkan, lifted its key rate to 15% from 8.5%, though the move was smaller than economists had expected as the country deals with inflation around 40%.
In testimony delivered to the House Financial Service Committee on Wednesday, U.S. Federal Reserve Chairman Jerome Powell told Congress that, with U.S. inflation well above target, more interest rates are likely this year. However, he was vague about the timing. The Fed last week left rates unchanged, its first pause since beginning a series of hikes in March 2022 that lifted the fed-funds rate from near zero to its current range of 5% to 5.25%.
Powell will testify Thursday before a U.S. Senate committee.
Data on weekly U.S. jobless claims is due at 8:30 a.m. Eastern.
What analysts say
“Apparently, the Fed’s pause wasn’t contagious. In an environment with tightening as the norm, one could be excused for assuming a degree of policy coordination on the part of major central banks,” said Ian Lyngen, rates strategist at BMO Capital Markets, in a note.
“We’re reminded, however, that such episodes occur when there is a shock to the global economy that warrants dramatic easing, not tightening. What’s currently in process is individual central banks responding to the realities of their nation’s specific economic performance,” he wrote.
This story originally appeared on Marketwatch
