By Orla McCaffrey
U.S. government bond yields posted their biggest weekly gain since August, supported by signs of an economic recovery and hopes of an economic recovery before or after the presidential election.
The benchmark 10-year T-bill yield peaked at 0.87% early in Friday before settling at 0.84%, Tradeweb said – down slightly from 0.847% on Thursday. He had previously climbed for six consecutive sessions, reaching his highest level since early June.
A critical benchmark for borrowing costs on everything from mortgages to student loans, the 10-year yield had spent months in a relatively tight range before its recent rise. While many worry the prospect of lawmakers reaching a stimulus deal ahead of the election remains grim, signs of progress in negotiations helped push yields above 0.8% for the first time since. June at the start of the week.
Investors are increasingly betting that Democrats will eventually control Congress and the White House after the election, increasing the chances of further fiscal stimulus and putting pressure on bond prices, said Priya Misra, head of global rate research at TD Securities.
“If we continue to price in a win at Biden, it all depends on the supply that comes down from the pike,” Ms. Misra said. “It’s just a standoff between supply and demand. Supply is winning right now.”
Yields continued to rise on Thursday after the Labor Department said the number of Americans claiming unemployment benefits was the lowest since the economic pain of the recession began to be felt in March. They scaled back their initial ascent on Friday, falling after a measure of manufacturing activity indicated that the US economy was continuing to grow, albeit at a slower pace.
The rise in yields may be short-lived. When the 10-year yield last rose above 0.8% in June, it only stayed a few sessions, before being dragged down by rising coronavirus cases and the announcement by the Federal Reserve that it did not intend to raise short-term interest rates until the end of 2022.
Nonetheless, some analysts have pointed to the growing spread between five-year and 30-year Treasury bill yields as a sign that investors expect growth and inflation to rise in the longer term, while public spending increases the supply of debt.
Write to Orla McCaffrey at [email protected]
(END) Dow Jones News Wire