U.S. Treasury yields moved slightly higher on Friday as investors continued to assess the global bond selloff, which intensified in recent sessions after hawkish Federal Reserve commentary and stronger-than-expected economic data.
The benchmark 10-year Treasury yield rose by less than one basis point to 5.17%, after touching its highest level since June 2007 on Thursday. The 30-year Treasury bond yield was flat at 5.463% after climbing to levels not seen since 2004, while the 2-year note yield was little changed at 4.899%.
One basis point equals 0.01%, and bond yields move inversely to prices.
Markets have been digesting a broad global bond selloff this week, with yields on Japanese government bonds, U.K. gilts, German bunds and other eurozone debt reaching fresh highs. On Friday, eurozone and Japanese government bond yields edged lower.
Higher Treasury yields were driven in part by hawkish remarks from Federal Reserve Governor Michael Barr, who said in a speech on Wednesday that “further policy adjustments” can be expected to bring inflation back to target. Persistent strength in oil prices and a purchasing managers' index report that reached its highest level in more than four years also added to the move.
According to the CME FedWatch tool, traders were last pricing in a nearly 71% chance of a rate hike in October.
Later on Friday, investors will watch the University of Michigan consumer sentiment report and durable goods data.
In a note published Friday, ING's regional head of research for the Americas Padhraic Garvey and senior rates strategist Benjamin Schroeder said markets appear to have already priced in a substantial amount of rate-hike fear at this stage, enough to account for perceived inflation risks.
They added, however, that government bond yields could remain under pressure because of debt dynamics, a backdrop that may lead to some re-widening in swap spreads, especially in the 10-year sector. The analysts also said Treasury Secretary Bessent's buyback programme has so far been successful in the sense that it was followed by tighter swap spreads.
