US Treasury yields fell further on Friday as weak economic data and a major interest rate hike from the European Central Bank stoked concerns of an economic slowdown.
At around 5:30 a.m. ET, the yield on the benchmark 10-year Treasury was down sharply to a more than two-week low of 2.8105%, deepening Thursday night’s drop, the worst drop in a single day. since March 2020. Meanwhile, the yield on 30-year Treasury bonds fell to 3.0113%. Yields move inversely to prices.
Initial jobless claims rose last week to their highest level in eight months, while an indicator of factory activity slumped in July, offering fresh indications that the US economy is slowing as rising interest rates and high inflation weigh on purchasing power.
The first flash readings of July’s PMI (Purchasing Managers Index) are due at 9:45 a.m. ET, offering further insight into the health of the economy.
The yield on the 2-year Treasury was last seen at around 3.0328%, above the 10-year and continuing the inversion of the closely watched 2-year/10-year curve.
Yield curve inversions – when short-term government bonds have higher yields than longer-term bonds despite lower risk – are often seen by markets as signs that a recession is imminent.
Risk sentiment eased further after the European Central Bank announced a 50 basis point hike in interest rates on Thursday, above its own earlier forecasts and marking its first hike in 11 years, worries about runaway inflation outweighing fears of a Russian war-induced slowdown in growth. in Ukraine.
All eyes will turn to the Federal Reserve next week as markets assess whether the US central bank will raise interest rates by 75 basis points or a more aggressive 100 basis points.
There is no Treasury auction scheduled for Friday.