On Thursday, U.S. Treasury bond yields rose as investors analyzed new economic data indicating a further slowdown in the economy. The 10-year Treasury yield increased by over 7 basis points, reaching 4.292%, while the 2-year also saw an increase of around 5 basis points to 4.756%. Yields and prices have an inverse relationship, with one basis point equal to 0.01%.
The initial jobless claims data showed a rise from the previous week, while housing starts and permits dropped more than anticipated last month. Additionally, investors analyzed a worse-than-expected reading of the Philadelphia Fed Manufacturing Index, contributing to ongoing signs of an economic slowdown.
Earlier in the month, data revealed that the number of Americans filing new claims for unemployment benefits surpassed expectations, reaching 229,000 for the week ending June 1. Economists had anticipated 220,000 claims for that period.
Despite this news, the Federal Reserve opted to keep its benchmark policy rate within the 5.25% to 5.50% range last week, where it has remained since July of the previous year. Minneapolis Federal Reserve President Neel Kashkari expressed surprise at the performance of the U.S. job market amid increased borrowing costs in 2022 and 2023. Kashkari mentioned that he anticipates further cooling and hopes for a modest adjustment that will lead to a more balanced economy.
The recent increase in yields is likely due to concerns about inflation and rising interest rates as well as uncertainty about future economic developments in China and Europe.
Overall, these developments suggest that investors are becoming increasingly cautious about investing in bonds as they continue to digest new economic data indicating a slower growth rate ahead.
