Ten-Year Yield Reaches Nearly Six-Month Closing High

Treasuries showed a notable move to the downside on Thursday, as the latest U.S. economic data added to ongoing concerns about the outlook for interest rates.

Bond prices regained some ground after coming under pressure early in the session but remained firmly negative. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, climbed 5.4 basis points to 4.706 percent.

The ten-year yield extended the upward move seen in the previous session, ending the day at its highest closing level in almost six months.

The continued weakness among treasuries came following the release of the Commerce Department's advance estimate on first quarter gross domestic product.

While the report showed the U.S. economy grew by much less than expected in the first quarter of 2024, it also showed a sharp increase in consumer prices during the quarter.

The report said gross domestic product increased by 1.6 percent in the first quarter after surging by 3.4 percent in the fourth quarter of 2023. Economists had expected GDP to jump by 2.5 percent.

Meanwhile, the Commerce Department said the personal consumption expenditures price index surged 3.4 percent in the first quarter after advancing by 1.8 percent in the fourth quarter.

Excluding food and energy prices, the PCE price index spiked 3.7 percent in the first quarter after jumping by 2.0 percent in the fourth quarter.

"The recent firmness in inflation will keep interest rates high for longer," said Ryan Sweet, Chief US Economist at Oxford Economics. "We recently revised our forecast for the timing of the first rate cut, pushing it back from June to September."

He added, "The delay in the first rate hike reduces the cumulative amount of easing this year from 75bps to 50bps and risks are weighted toward less."

Trading on Friday is likely to be driven by reaction to the Commerce Department's report on personal income and spending, which includes readings on inflation said to be preferred by the Federal Reserve.

Market Analysis