Treasury Yields Rise as Autoworkers Go on Strike

On Friday morning, Treasury yields experienced an upward trend, extending the momentum observed in the previous session. This movement came in response to the initiation of a strike by the United Auto Workers, raising concerns about potential inflationary pressures in the automotive sector.

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Key yield figures for the day are as follows:

• The yield on the 2-year Treasury (BX:TMUBMUSD02Y) reached 5.02%, marking a marginal increase of less than 1 basis point from the previous day's rate of 5.011%.
• The yield on the 10-year Treasury (BX:TMUBMUSD10Y) stood at 4.312%, reflecting a rise of 2.3 basis points from its Thursday afternoon level of 4.289%.
• The yield on the 30-year Treasury (BX:TMUBMUSD30Y) reached 4.405%, indicating a 2.1 basis point increase from the late Thursday rate of 4.384%.

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The driving force behind these market movements stems from the initiation of a strike by nearly 13,000 U.S. auto workers. This strike unfolded as negotiations between the Big Three automakers and the United Auto Workers failed to yield an agreement before the expiration of their national contract, just before midnight. The union's demands include double-digit wage increases, the elimination of tiered wages and benefits, the reinstatement of pensions and cost-of-living adjustments, higher retiree compensation, and more.

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While negotiations reportedly continue, this limited strike has the potential to disrupt production in the auto industry if it persists. Furthermore, it may introduce significant upward pressure on motor vehicle prices, as highlighted by economists Murat Tasci and Daniel Silver at JPMorgan Chase.

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In terms of economic updates in the United States on Friday, the New York Empire State manufacturing index rebounded in September to 1.9, driven by an increase in new orders and shipments. Additionally, U.S. industrial production exceeded expectations, growing at a rate of 0.4% for August. However, consumer sentiment registered a decline for the second consecutive month during September.

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Looking ahead, the Federal Reserve's policy meeting next week will be closely watched for decisions on interest rates. While the likelihood of a rate hike is minimal, the central bank will provide updates on its economic outlook and rate forecasts.

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Thursday's U.S. reports also revealed stronger-than-expected retail sales and producer price increases for the month of August.

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