US 10-Year Yield Holds Increase

The yield on the 10-year US Treasury note eased slightly to around 4.26% on Thursday but remained close to its highest level since August, supported by expectations that the Federal Reserve may hold off on interest rate cuts. Fed Governor Lisa Cook emphasized concerns over stalled inflation progress rather than a slowing labor market, indicating she would not support rate reductions until price pressures ease. Investors also weighed the implications of Kevin Warsh’s nomination as Fed chair, noting his preference for a smaller Fed balance sheet and a more measured approach to rate cuts. On the data front, the ADP report showed private employment growth fell well below expectations, while services activity exceeded forecasts. Meanwhile, the US Treasury maintained its issuance guidance for upcoming quarters, favoring a larger share of short-term bills over longer-term bonds to help manage borrowing costs amid elevated interest rates.

The yield on the 10-year US Treasury note rose to the 4.28% mark, near the five-month high of 4.3% on January 20th after the US Treasury maintained its guidance on Treasuries issuance for the upcoming quarters. The Treasury maintained a larger portion of borrowing in short term bills instead of longer-maturity bonds in an attempt to ease the debt burden of elevated interest rates. The announcement also contrasted with some expectations that the Treasury could reduce the supply of duration to tame long-term yields in President Trump's effort to reign in mortgage rates. Recently, Treasuries were also pressured by Trump's nomination of Kevin Warsh as the next Fed Chairman, who had previously advocated for a small balance sheet by the central bank. Yields also increased on a strong economic activity reflected by ISM PMIs. However, data from the ADP, which is under higher scrutiny due to the delay of the January BLS jobs report, maintained a slow hiring labor market.

The yield on the 10-year US Treasury note rose above 4.27%, approaching the five-month high of 4.3% on January 20th, as markets assessed the outlook for growth and monetary policy by the Federal Reserve under incoming Chairman Kevin Warsh. Markets pulled away from the safety of Treasuries on fresh strength for precious metals, after their selloff drove major exchanges to significantly increase margin requirements for open positions and impact other asset classes. In the meantime, fixed-income investors continued to assess how Warsh may guide the FOMC this year. The soon-to-be Chairman is seen as an inflation hawk and has previously opposed a larger Fed balance sheet during the global financial crisis, widening the US yield curve at the turn of the month. Yields also increased after fresh data from the ISM reflected an unexpected rebound in the US manufacturing sector.