Yields on long-term U.S. government bonds saw a notable increase towards the end of June, marking their highest levels in over two weeks. This uptick was primarily driven by a flurry of selling activity among traders who were adjusting their positions as the month and quarter drew to a close. The movement in yields affected various maturities of Treasury securities, including the 2-year, 10-year, and 30-year bonds, which all recorded gains for the second consecutive quarter.
The 2-year Treasury yield edged slightly higher to 4.718%, up from 4.714% the previous day. Over the past two quarters, this yield has climbed by 47 basis points, the most significant increase over such a period since September 2023. Meanwhile, the yield on the benchmark 10-year Treasury note rose by 5.5 basis points to 4.342%, compared to 4.287% on the preceding day. Similarly, the 30-year Treasury yield increased by 7.6 basis points to 4.502%, from 4.426% previously. These levels represented the highest rates seen for the 10-year and 30-year yields since mid-June, with both bonds gaining 48.2 basis points over the past two quarters.
The reversal in bond prices and subsequent rise in yields on Friday followed an initial bond market rally earlier in the day, triggered by the release of May’s personal-consumption-expenditures (PCE) inflation data. Initially, the market reacted positively to the data, which showed no increase in the PCE price index and a minimal 0.1% rise in core PCE, excluding volatile items like food and energy. This subdued inflation report provided temporary relief to investors concerned about rising price pressures.
San Francisco Fed President Mary Daly, commenting on CNBC, acknowledged the moderation in inflation indicated by May’s PCE data but emphasized ongoing challenges in managing inflationary expectations. The Federal Reserve continues to monitor economic indicators closely as it navigates monetary policy decisions.
Aside from inflation data, market participants also focused on the broader U.S. fiscal outlook, particularly following a televised debate between President Joe Biden and former President Donald Trump. The implications of potential policy shifts discussed during the debate could influence market sentiment and future economic projections.
Overall, the movement in Treasury yields reflected a complex interplay of economic data releases, market sentiment adjustments, and anticipations regarding future Federal Reserve actions and fiscal policies, highlighting the ongoing volatility and uncertainty in financial markets.