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Treasury Yields Turn Mixed as Buyers Return to Long-Dated Debt

October 31, 2023
minute read

Treasury yields remained stable on Tuesday morning, as several international and domestic factors combined to make long-term U.S. government debt more appealing.

Here's the current yield situation:

  • The 2-year Treasury yield increased by 2.5 basis points to 5.062%, up from Monday's 5.037%.
  • The 10-year Treasury yield saw a slight decrease of less than 1 basis point, dropping to 4.869% from Monday's 4.875%.
  • The 30-year Treasury yield decreased by 1.9 basis points, reaching 5.015% from Monday's 5.034%.

What's influencing the financial markets:Investors have shown renewed interest in long-term U.S. government bonds due to a range of factors that have bolstered bond prices and suppressed yields.

On the international front, data released on Tuesday revealed an unexpected contraction in China's manufacturing sector for October, raising concerns about the global economy's strength.

Additionally, the Bank of Japan has eased its restrictions on bond yields, stating that its 1% cap on 10-year Japanese government bonds is now more of a reference point than a strict upper limit. Since 10-year Treasurys offer higher yields compared to their Japanese counterparts, investors are attracted to the relatively more appealing U.S. notes.

The recent surge in long-term U.S. yields has also been curbed by the U.S. Treasury's announcement on Monday that it plans to borrow less than initially anticipated during the fourth quarter. The Treasury is set to reveal its quarterly refunding plans on Wednesday, which aligns with the Federal Reserve's policy update.

Regarding U.S. economic news on Tuesday, a metric reflecting the cost for businesses to employ workers saw a notable 1.1% rise in the third quarter, contributing to upward pressure on U.S. inflation. Additionally, home prices in the 20 largest U.S. metropolitan areas continued to rise for the sixth consecutive month as of August.

Analysts have commented on the situation, with BMO Capital Markets strategists Ian Lyngen and Ben Jeffery stating, "The increased focus on the longer end of the Treasury curve indicates the relatively attractive nature of longer-term rates at the moment. The bid for Treasuries was supported not only by the Bank of Japan's flexible approach to the 1% threshold and slightly reduced borrowing requirements but also benefited from disappointing economic data from various regions."

Bryan Curtis
Eric Ng
John Liu
Editorial Board
Bryan Curtis
Adan Harris
Managing Editor
Cathy Hills
Associate Editor

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