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Treasury yields hold steady despite data showing U.S. is about to face serious headwinds

  • “We enter the weekend with another round of inflation behind us. A weak retail
    sales number. Slowing economic data. And a chorus of Fed speakers reiterating
    a Fed that’s firmly on hold. Markets now pricing in a full cut by the
    September meeting and the window for 2024 closing quickly,” said Gregory
    Faranello, head of U.S. rates trading and strategy at AmeriVet Securities in
    New York.

Rates on U.S. government debt were slightly higher Friday morning even after Conference Board data pointed to softer economic conditions ahead.

What’s happening

The yield on the 2-year Treasury BX:TMUBMUSD02Y was 4.804%, up 1.3 basis
points from 4.791% on Thursday. Yields move in the opposite direction to
prices.The yield on the 10-year Treasury BX:TMUBMUSD10Y was 4.402%, up 2.6
basis points from 4.376% on Thursday.The yield on the 30-year Treasury
BX:TMUBMUSD30Y was 4.544%, up 2.7 basis points from 4.517% on Thursday.

What’s driving markets

Data released on Friday showed the Conference Board’s leading economic index
decreased by 0.6% in April to 101.8. Fueling the decline were factors such as
a deteriorating consumer outlook on business conditions, weaker new orders,
and a drop in new building permits.

Elevated inflation, high interest rates, rising household debt, and depleted
pandemic savings are all expected to keep weighing on the economy in 2024,
according to the Conference Board. It said it sees “serious headwinds to
growth ahead,” and expects real GDP growth to slow to under 1% over the second
quarter to third quarter.

Separately, Federal Reserve Gov. Christopher Waller delivered remarks about
the payment system Friday morning.

What analysts are saying

“We enter the weekend with another round of inflation behind us. A weak retail
sales number. Slowing economic data. And a chorus of Fed speakers reiterating
a Fed that’s firmly on hold. Markets now pricing in a full cut by the
September meeting and the window for 2024 closing quickly,” said Gregory
Faranello, head of U.S. rates trading and strategy at AmeriVet Securities in
New York.