U.S. Treasuries experienced their worst week in eight months, as mixed economic data raised doubts about future Federal Reserve interest rate cuts. Yields on the 10-year and 30-year bonds rose 4 basis points on Friday, marking their largest weekly gains since April. While traders expect a rate cut next week, concerns about the labor market’s health are leading to a more hawkish outlook.
The rise in yields, with the 10-year closing at 4.14%, followed a release of inflation data that showed an acceleration to 2.8%. This has led some Fed policymakers to suggest that inflation trends might rule out future rate cuts. Uncertainty about potential changes in Fed leadership has also contributed to market volatility.
Despite the rise in yields, significant buying of 5-year and 10-year Treasury futures occurred. Upcoming Treasury auctions next week and an anticipated Fed announcement on December 10 are influencing market sentiments. Additionally, concerns about global bond market dynamics, notably comments from the Bank of Japan’s governor regarding potential rate hikes, may be affecting U.S. rates.
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