Yields climb as Trump says no deal needed with Iran
TLT•U.S. Treasury yields rose after Donald Trump said the United States does not need a deal with Iran, while traders weighed the possibility of a larger-than-usual Federal Reserve rate hike. The 10-year yield reached 5.1169%, and demand for a $25 billion 30-year bond auction was the weakest since June.
1. Treasury yields rise
Treasury yields climbed after Trump said the United States does not need a deal with Iran. The two-year yield rose 13.96 basis points to 4.867%, its highest since October 14, while the 10-year yield increased 11.58 basis points to 5.105% and reached 5.1169%, its highest since October 21. The gap between two- and 10-year yields narrowed to 21 basis points, its flattest since September 24.
2. Rate hike expectations
Traders are assessing the chance of a 50-basis-point rate hike in December, larger than the usual 25-basis-point moves. Fed funds futures were pricing in 29 basis points of hikes for the month. Cleveland Fed President Beth Hammack said she favors gradual increases in smaller increments, while other Fed officials expressed concern about elevated inflation.
3. Deficit and bond auction
The U.S. government recorded a $404 billion budget deficit for October, a record for the month and $120 billion, or 42%, above the year-earlier period, the Treasury Department said. A $25 billion sale of 30-year bonds drew demand 2.36 times the amount offered, the lowest since June; the bonds sold at a 5.441% yield.
