Two- through 30-year Treasury yields end slightly higher on Monday after Bank of Japan Gov. Kazuo Ueda hinted at a possible conclusion to negative interest-rate policy.
What happened
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The yield on the 2-year Treasury
BX:TMUBMUSD02Y
rose 1.1 basis points to 4.993% from 4.982% on Friday. The 2-year yield is up five of the past six trading days, according to 3 p.m. Eastern time figures from Dow Jones Market Data. Yields move in the opposite direction to prices. -
The yield on the 10-year Treasury
BX:TMUBMUSD10Y
advanced 3 basis points to 4.287% from 4.257% on Friday. The 10-year rate is up four of the past six sessions. -
The yield on the 30-year Treasury
BX:TMUBMUSD30Y
climbed 4.6 basis points to 4.376% from 4.330% on Friday.
What drove markets
U.S. yields mostly advanced on Monday after the Bank of Japan suggested it may soon end its negative interest-rate stance.
Ten-year JGB yields
BX:TMBMKJP-10Y
rose above 0.7% to their highest since at least 2014, nudging up equivalent U.S. and European yields. The moves came after Bank of Japan Governor Kazuo Ueda told the Yomiuri newspaper over the weekend that by the end of 2023, the central bank should have an idea about whether its decade of easy monetary policy can come to a conclusion.
“Once we’re convinced Japan will see sustained rises in inflation accompanied by wage growth, there are various options we can take,” Ueda said in an interview. “If we judge that Japan can achieve its inflation target even after ending negative rates, we’ll do so.”
Investors are also contemplating the prospects for U.S. monetary policy ahead of August’s consumer-price index due Wednesday and a retail sales report for the same month on Thursday, which may influence the thinking of Federal Reserve policy makers ahead of their Sept. 19-20 meeting.
Markets are pricing in a 93% probability that the Fed will leave interest rates unchanged at a range of 5.25%-5.50% next week, according to the CME FedWatch Tool. The chance of a 25-basis-point rate hike to a range of 5.5%-5.75% at the subsequent meeting in November is priced at 42.6%.
What analysts are saying
“If last week was a bit light on important data, you can’t say the same about this week’s high-impact extravaganza that will occur in a Fed blackout period as next week’s FOMC lurks in the wings,” said strategist Jim Reid and others at Deutsche Bank.
“U.S. CPI (Wednesday) will be the obvious standout but U.S. PPI and retail sales (Thursday) are nearly as important given how some of the PPI subcomponents feed into the Fed’s preferred core PCE, and for retail sales, we’ll see how much momentum has been lost after a phenomenally strong July print,” the Deutsche Bank team wrote in a note.
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