WHAT YOU NEED TO KNOW
  • The 10 year Treasury yield fell more than 5 basis points to 5.256% after reaching its highest level since April 2002.
  • Brent crude and West Texas Intermediate futures each declined 2%, accompanying the pullback in Treasury yields.
  • Traders priced a roughly 78% chance that the Federal Reserve would keep rates unchanged at its next meeting.
  • Investors await Wednesday’s release of minutes from the Federal Open Market Committee’s September meeting.

DISCLAIMER: GoldInvestors.news is not a registered investment, legal or tax advisor or broker/dealer. All investment/financial opinions expressed by GoldInvestors.news are from the personal research and experience of the owner of the site and are intended as educational material. Although best efforts are made to ensure that all information is accurate and up to date, occasionally unintended errors and misprints may occur.

U.S. Treasury yields moved lower Tuesday, pulling back from levels reached after Monday’s sharp surge. The retreat came alongside falling oil prices, with benchmark government debt yields easing after touching heights not seen in decades.

The benchmark 10 year Treasury yield was last down more than 5 basis points at 5.256%. That marked a reversal from Monday, when the yield reached its highest level since April 2002.

The 30 year Treasury yield also declined, falling more than 3 basis points to 5.625%. It had previously climbed to a level not recorded since May 2002, placing the long maturity yield above the 10 year benchmark.

Shorter maturity debt joined the broader pullback. The two year Treasury note yield was down more than 4 basis points at 4.787%, leaving all three reported maturities lower during Tuesday’s trading.

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A basis point equals 0.01%, making even seemingly small moves notable when tracking changes across Treasury maturities. Bond prices and yields move in opposite directions, so declining yields correspond with rising prices.

The Treasury retreat unfolded as oil prices moved lower. Brent crude was trading down 2% at around $98 per barrel, while West Texas Intermediate futures slid 2% to approximately $87 per barrel.

Both major oil benchmarks therefore recorded declines of similar proportions during the reported period. The movement in crude occurred as Treasury yields eased from the elevated levels reached during the previous session.

Monday had delivered a sharp jump in government bond yields. The 10 year and 30 year yields recorded 24 year highs after the release of fresh data from the Institute for Supply Management.

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That report showed cooling growth in services. The PMI reading rose to 54.9 in September, landing virtually in line with expectations while coming in just below the growth reported for August.

The report’s prices index moved in the opposite direction from the cooling services growth described in the data. It increased 1.4 points to 74, providing another figure for traders assessing the economic picture.

After Monday’s surge, Tuesday’s declines left the 10 year and 30 year yields below their latest peaks. Even after the pullback, both remained above 5%, while the two year yield stood below that threshold at 4.787%.

Attention has also turned toward the Federal Reserve’s next interest rate decision. Traders were pricing in a roughly 78% chance that the central bank would leave rates unchanged at its next meeting, according to the CME Group’s FedWatch tool.

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That pricing made an unchanged rate the more likely outcome reflected by the tool at the time of the report. The probability nevertheless represented market pricing rather than an announced decision from the Federal Reserve.

The major scheduled event of the week will be Wednesday’s release of minutes from the Federal Open Market Committee’s September meeting. Investors are expected to examine the document closely for clues about the future direction of monetary policy.

Tuesday’s session consequently brought a measure of relief from Monday’s rapid yield increase. Lower crude prices accompanied the Treasury move, while traders continued watching economic data, Federal Reserve expectations, and the approaching release of the September meeting minutes.

DISCLAIMER: GoldInvestors.news is not a registered investment, legal or tax advisor or broker/dealer. All investment/financial opinions expressed by GoldInvestors.news are from the personal research and experience of the owner of the site and are intended as educational material. Although best efforts are made to ensure that all information is accurate and up to date, occasionally unintended errors and misprints may occur.