Ten-Year Yield Closes Above 4.0% For First Time In Fourteen Years

After an early move to the upside, treasuries showed a notable pullback over the course of the trading session on Friday.

Bond prices pulled back well off their early highs and firmly into negative territory. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, climbed 5.8 basis points to 4.010 percent after hitting a low of 3.851 percent.

With the turnaround on the day, the ten-year yield closed above 4.0 percent for the first time in fourteen years.

The pullback by treasuries came following the release of a report from the University of Michigan showing a rebound in inflation expectations in the month of October.

One-year inflation expectations climbed to 5.1 in October after dropping to a one-year low of 4.7 in September, while five-year inflation expectations increased to 2.9 percent in October after falling to 2.7 percent in September.

“Last month, long run inflation expectations fell below the narrow 2.9-3.1% range for the first time since July 2021, but since then expectations have returned to that range at 2.9%,” said Surveys of Consumers Director Joanne Hsu.

The data led to renewed inflation concerns after optimism inflation has peaked contributed to the substantial turnaround on Wall Street on Thursday.

Traders largely shrugged off a separate report from the Labor Department showing another steep drop in U.S. import prices in the month of September.

The report showed import prices plunged by 1.2 percent in September after tumbling by a revised 1.1 percent in August.

The Labor Department also said the annual rate of import price growth slowed dramatically to 6.0 percent in September from 7.8 percent in August.

The year-over-year growth in September reflected the smallest 12-month advance since import prices rose 3.0 percent for the year ended February 2021.

“After the discouraging signs offered by this week’s PPI and CPI reports, today’s import prices have shown some slowing of inflation pressures in the economy,” said Matthew Martin, U.S. Economist at Oxford Economics.

He added, “However, given the acceleration of core CPI prices, the Fed will remain resolved to increase rates by at least 125bps before year end.”

The Commerce Department also released a report showing U.S. retail sales unexpectedly came in unchanged in the month of September.

Following the release of some key economic reports over the past week, the economic calendar for next week is relatively quiet.

Traders are still likely to keep an eye on reports on industrial production, housing starts, and existing home sales.

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