US yields fall as investors seek safety and bet on pause in rate hikes
TLT•The 10-year Treasury yield fell 10.1 basis points to 5.089%, while traders priced a 73% chance the Federal Reserve will hold rates steady at its October meeting. Longer-dated yields reached their lowest levels since September 23 as investors sought safety and weighed growth concerns and Fed signals.
1. Treasury yields decline
Longer-dated US Treasury yields fell to their lowest levels since September 23 on Thursday, with the 10-year yield down 10.1 basis points to 5.089% and the 30-year yield down 9.8 basis points to 5.426%. The two-year yield fell 5.3 basis points to 4.749%.
2. Investors weigh growth and inflation
Yields briefly pared their declines after retail sales and producer-price data came in stronger than expected, then resumed falling. September retail sales rose more than expected on higher gasoline prices, while spending elsewhere was moderate; producer prices recorded their largest increase in 4-1/2 years. Schwab Center for Financial Research's Collin Martin said some components of the inflation report were softer and cited concerns that inflation could weigh on long-term growth.
3. Fed pause expectations
San Francisco Fed President Mary Daly said the Fed will probably need to raise short-term rates further but signaled no need to do so at its October 27-28 meeting. Traders priced a roughly 73% chance of rates staying steady this month and a nearly 91% chance of a hike in December. The two-to-10-year Treasury yield curve stood at a positive 33.8 basis points, while the 10-year TIPS breakeven rate was 2.336%.
