Long-term treasury yields on Thursday were expected to fall for the fourth day in a row, and the ten-year treasury rate hung around its lowest level in more than a week. Investors attributed the rise in yield prices in part to concerns about Europe’s recovery from the COVID-19 pandemic, which spurred the purchase of U.S. government debt.
Market participants will also analyze an updated estimate of U.S. GDP in the fourth quarter and a closely monitored reading of weekly unemployment claims.
What are the vaults like?
Ten-year Treasury bill TMUBMUSD10Y,
they bring 1,603%, which is a drop of 1 base point and is around the lowest level since March 15.
30-year treasury bond TMUBMUSD30Y,
it brought in 2,297%, down 1.7 basis points from 2.314% on Wednesday.
Two-year Treasury bill TMUBMUSD02Y,
was at 0.144%, compared to 0.143% one day ago.
Bond prices rise as yields fall.
What drives the fixed income market?
Federal Reserve Chairman Jerome Powell said in an interview with NPR on Thursday that the rebound from COVID has formed faster than policymakers expected, but stressed that policymakers will only gradually reduce adjustment policies.
“Over time, we will very gradually and with great transparency, when the economy recovers almost completely, withdraw the support we provided in emergencies,” Powell told NPR, the day after the second day of congressional testimony to explain the health of the economy after the COVID pandemic.
Powell’s comments are an attempt to stifle the market-driven perception that the Fed will be forced to raise reference interest rates faster than they would prefer because the economy is going hotter than expected. Projections by Fed members show that the central bank will not raise rates until around 2023.
The market will gather fresh clues as to how well the economy is recovering with data on unemployment benefit claims for the week ending March 20, at 8:30 a.m. East. Economists polled by Dow Jones expect 735,000 applications from 770,000 in the previous period.
Meanwhile, consensus estimates predict that the fourth-quarter GDP reading will be held at 4.1% from previous estimates.
Looking ahead, investors will be focused on a $ 62 million auction in seven-year Treasury bills at 1 p.m. Eastern, the last share of the $ 183 billion issue issued by the bond market this week.
What do fixed-income strategists say?
“After a successful seven-year auction of the American treasury, the curve began to calm down. It still expects an increase in 2023 when the Federal Reserve does not expect any, as there is a fundamental disagreement over the Fed’s reaction function within average inflation targeting (AIT), ”wrote Sebastien Galy, senior macro strategist at Nordea.
“The market believes that inflation will be above the target for a while, not excessively, forcing the Fed to tighten early, the Fed disagrees,” he wrote.