US Treasury yields fell Thursday morning, with 5-year and 30-year interest rates remaining inverted, as investors digested the minutes of the latest Federal Reserve meeting.
return on standard 10-year treasury bonds It shed 4 basis points to 2.5659% at 4:15 AM ET. return on 30 year treasury bonds It gave up 2 basis points to 2.6046%, while 5 years average It fell 6 basis points to 2.6381%. Returns move inversely with prices and one basis point is 0.01%.
The minutes of the Federal Reserve’s meeting, released on Wednesday afternoon, showed that US central bank officials plan to shrink its balance sheet by $95 billion per month. Federal Reserve officials have also indicated that there may be one or more interest rate increases of 50 basis points in the future.
This hawkish Fed tone sent the 10-year Treasury yield to a 3-year high. Investors are becoming concerned that a more aggressive Fed tightening, in an effort to combat rising inflation, could hurt economic growth and lead to a recession.
Fluctuations in Treasury yields, with investors selling short-term government bonds in favor of longer-term debt, have reflected on recession fears.
Simon Harvey, head of FX analytics at Monex Europe, told CNBC’s “Squawk Box Europe” on Thursday that the amount the Fed was withdrawing from the Treasury market was not necessarily “very aggressive.”
He expected the announcement of two consecutive interest rates of 50 basis points in the upcoming meetings of the Federal Reserve.
After those two hikes, Harvey said the Fed will look to see if that’s enough to solidify inflation expectations, to see if it can continue to rise in 25 basis point increments.
Harvey suggested that if this was not enough to control inflation, there could be a “reassessment of a higher interest rate,” which is the end point for the Fed’s rate hike.
On Thursday, the Labor Department is set to release the number of initial jobless claims filed for the week ending April 2, at 8:30 a.m. ET. Economists expect 200,000 unemployment insurance claims to be filed last week.
Auctions are scheduled for $35 billion bills for 4 weeks and $30 billion for 8-week bills.
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