US 10-year yield drops 6 bps to 4.32% as bond market recovers from Warsh-driven rout on dovish data.
The 10-year yield initially jumped to 4.45% on Warsh’s hawkish debut but retreated to 4.32% after a soft durable goods report eased rate-hike fears, driving a Treasury rally.
The 10-year yield swung from a high of 4.45% to a low of 4.32%, a 13-basis-point intraday range.
Short-term momentum favors Treasuries, but upside is capped by persistent inflation risks and the potential for more hawkish Fed communication.
The 2-year note rallied alongside the long end, with its yield dropping 8 basis points to 4.78% as markets priced out a July rate hike, reflecting a shift in near-term Fed expectations.
The 2-year is more sensitive to rate expectations, and the durable goods data caused a larger repricing of near-term Fed hikes, leading to a steeper decline in the short end.
After the durable goods miss, market pricing suggested less than a 30% chance of a July hike, down from over 60% before Warsh’s remarks.
US Treasuries rebounded on Thursday, reversing a sharp selloff triggered by Federal Reserve Governor Kevin Warsh’s inaugural remarks. The 10-year yield fell 6 basis points to 4.32% after spiking to 4.45% earlier, as traders pared back rate-hike expectations. A weaker-than-expected durable goods print added to the bid for bonds, overshadowing Warsh’s hawkish tone.
Warsh’s debut remarks at the Fed struck a hawkish tone, emphasizing the need for further rate hikes to anchor inflation expectations, which led to a sharp selloff in Treasuries and spiked yields.
Treasuries rebounded after a softer-than-expected durable goods report prompted traders to reassess the pace of Fed tightening, pushing yields lower and bond prices higher.
The market is now pricing fewer rate hikes, signaling skepticism that the Fed will follow through on its hawkish guidance if economic data continues to weaken.