Treasury yields remained stable on Friday, with longer-term notes receding from recent highs in anticipation of the release of a consumer confidence report and home sales data.
Key Highlights:
- The yield on the 2-year Treasury rose slightly to 4.364%, after reaching a one-week high of 4.355% on Thursday.
- The yield on the 10-year Treasury slipped 1 basis point to 4.13% from Thursday’s level of 4.142%, which was the highest since Dec. 12.
- The yield on the 30-year Treasury fell 2 basis points to 4.348%, following its highest level since Dec. 4 on Thursday, at 4.371%.
Market Drivers:
The recent decrease in weekly jobless claims to a 16-month low, along with stronger-than-expected retail sales data, have led some investors to believe that the market may be overly optimistic about potential interest rate cuts this year.
More data is expected later in the day, including an initial reading on consumer sentiment by the University of Michigan at 10 a.m., and existing home sales for December.
Several Federal Reserve officials have expressed their opposition to hasty rate cuts, with Atlanta Fed President Raphael Bostic reaffirming on Thursday that rate cuts are unlikely to occur until later in the year.
According to the CME FedWatch Tool, markets indicate a 97.4% probability that the Fed will maintain interest rates between 5.25%-5.5% on Jan. 31. The chance of a 25-basis-point rate cut by March decreased to 53.8% from 76.9% a week ago. However, fed-funds futures traders still anticipate five to seven quarter-point cuts by December.
Scheduled Appearances:
Chicago Fed President Austan Goolsbee is expected to make a TV appearance at 8:30 a.m. Eastern, while Fed Vice Chair for Supervision Michael Barr is scheduled to speak at 1 p.m., followed by San Francisco Fed President Mary Daly at 4:15 p.m.
