Treasury yields ended at their highest levels of the month on Friday and notched their second weekly advance as the United Auto Workers went on strike, raising concerns about a return of price pressures in the auto sector.
What happened
-
The yield on the 2-year Treasury
BX:TMUBMUSD02Y
advanced 1.9 basis points to 5.03% from 5.011% on Thursday. It rose 4.8 basis points this week. -
The yield on the 10-year Treasury
BX:TMUBMUSD10Y
rose 3.2 basis points to 4.321% from 4.289% Thursday afternoon. The 10-year rate rose 6.4 basis points this week. -
The yield on the 30-year Treasury
BX:TMUBMUSD30Y
advanced 2.6 basis points to 4.410% from 4.384% late Thursday. It gained 8 basis points this week. - Friday’s levels were the highest for the 10- and 30-year yields since Aug. 22, and for the 2-year rate since Aug. 28, according to 3 p.m. Eastern time figures from Dow Jones Market Data. It was the second weekly advance for all three rates.
What drove markets
Almost 13,000 U.S. auto workers went on strike Friday after the Big Three car manufacturers and the United Auto Workers failed to reach an agreement before their national contract expired just before midnight. The union is asking for double-digit percentage wage increases, an end to tiered wages and benefits, the restoration of pensions and cost-of-living adjustments, retiree pay increases, and more.
The limited strike, which is taking place while negotiations reportedly continue, has the potential to disrupt auto-industry production if it continues. It may also lead to significant upside risk to motor vehicle prices, according to economists Murat Tasci and Daniel Silver at JPMorgan Chase.
Read: UAW strike stirs stock-market worries over corporate margins
In Friday’s U.S. economic updates, the New York Empire State manufacturing index rebounded in September to 1.9 as new orders and shipments increased. Separately, U.S. industrial production rose at a stronger-than-expected 0.4% rate for August, while the cost of imported goods rose by the most in 15 months largely because of higher oil prices. Though consumer sentiment fell for second month in a row during September, Americans think inflation will continue to slow.
Next week’s Federal Reserve policy decision is looming. While there’s virtually no chance of a rate hike, central bankers will be updating their economic and interest-rate forecasts.
Read: Fed preview: Powell will try not to upset the apple cart
Thursday’s U.S. reports showed a stronger-than-expected rise in retail sales and producer prices for August.
What analysts are saying
“Big economic releases this week failed to shift Fed expectations much or shake bond yields out of relatively narrow ranges since the middle of last week,” said Will Compernolle, macro strategist at FHN Financial in New York.
“Markets are effectively certain the Fed will leave rates unchanged next week, and the odds of an additional hike this year are still roughly a coin toss after this week’s data,” Compernolle wrote in an email. “Notably, the highest probability for an additional hike, according to fed funds futures trading, is now at the December meeting instead of the November meeting, a slight change from the past four months, although a few percentage points in market-implied probability doesn’t mean very much.”
Read the full article here
