U.S. 10-year treasury yield increased 4 basis points to 4.626%, closest to their seven-month peak, the prior session when it traded at 4.641%.
This is reflected in the increased yields due to ongoing market uncertainty and expectations of tighter monetary policy by the Federal Reserve in 2025.
Unemployment claims during the week which ended on Dec. 21 dropped to 219,000. This is down by 1,000 and well below expectations. The continuation claims however increased to 46,000 with its highest figure since November 2021.
Key Background:
The 10-year U.S. Treasury bond yield advanced Friday, pushing closer to a seven-month high. It rose 4 basis points to 4.626%, still in a pattern of increasing yields. It had advanced to 4.641% in the prior session, its highest since May. Meanwhile, the yield on the 2-year Treasury was little changed at 4.318%.
The yields and bond prices move inversely, so a rise in yields reflects a drop in the price of bonds. This rise in the 10-year yield continues the volatility of the bond market in recent times, fueled by the anticipation of tighter monetary policy going forward. A basis point represents 0.01% of the yield, so this small yet significant daily movement in Treasury yields.
According to other Treasury data, the U.S. 1-month Treasury yield stood at 4.354%, with an increase of 0.036%. The 3-month Treasury yield rose to 4.299%, an increase of 0.005%. The 30-year Treasury yield was 4.811%, a slight increase of 0.001%.
Yields improved with jobless claims data for the week of December 21, showing a slight gain. Claims decreased to 219,000, 1,000 from a consensus estimate of 225,000. But continuing claims rose by 46,000 to a record 1.72 million since November 2021. Data is thus mixed on the labor market: still strong but strained.
The 10-year Treasury yield has gained over 40 basis points in December, signaling an increasing belief that the Federal Reserve is going to become more hawkish in 2025. The Fed is set to hold its next meeting at the end of January and traders are looking for a rate-hike pause there. This Treasury yields increase would therefore align with broad market expectations of seeing rates stay up much longer from here due to the continuing fight with inflationary forces during next year. While closing the last quarter, financial markets would be scanning the last bit of the economic data out for some further signs in the policy directions of the Fed.
