10-year Treasury yield hits 13-month high


Treasury yields rose slightly on Friday to cap off the weeklong climb as investors focused on the threat of a potential government shutdown as the Senate prepares to take up a short-term spending bill.

What are Treasurys doing?

The yield on the benchmark 10-year Treasury note

TMUBMUSD10Y, -0.41%

rose to 2.630%, from 2.611% late Thursday, according to Tradeweb. That’s the highest yield on the note since December 2016.

The 2-year note yield

TMUBMUSD02Y, -0.17%

was little changed at 2.048%, while the 30-year bond yield

TMUBMUSD30Y, -0.32%

ticked higher to 2.911%, versus 2.888%.

Bond prices move inversely to yields.

What’s driving markets?

Market participants said the chances of a stopgap spending bill clearing the Senate has diminished amid growing tensions between the Democrats and Republicans. If lawmakers do not pass the bill by Friday, the government will go into a partial shutdown this weekend. The Senate is set to vote on Friday morning after the House passed the short-term spending measure.

See: A government shutdown ‘could reintroduce investors to the fact that markets go down’

Also read: This is what happens in the stock market when the government shuts down

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The political uncertainty roiled the bond market, pushing the 10-year note yield to a 14-month high. But rising Treasury yields also reflect concerns about strengthening global growth and improving inflation prospects. One market based measure of inflation expectations surged to 2.09% on Thursday, a three-year high.

What are market participants saying?

“The economy remains in solid shape, and a protracted shutdown would need to occur before growth would be significantly affected. Market reactions generally have been muted to these events in the past,” said Craig Holke, investment strategy analyst for Wells Fargo Investment Institute.

What else is on investors’ radar?

The White House is considering San Francisco Fed President John Williams for vice chairman of the Fed’s Board of Governors, news reports said. The position is the second highest ranking member of the central bank.

Friday’s docket will be packed with speeches from several members of the central bank. Atlanta Fed President Raphael Bostic will speak at 8:45 a.m. Eastern. Fed vice chairman for supervision Randal Quarles will talk at 1 p.m. Soon after, Williams will speak at 1:30 p.m.

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