US Bond Treasury Yield Notes fall big: Why are 10-year, 30-year, 2-year notes down? Check factors, what to expect

US bond yield on the benchmark US 10-year Treasury note was down 6.5 bps at 4.98 per cent on Thursday. The yield on the 30-year bond also fell 4 bps to 5.321 per cent. The two-year US Treasury yield, which typically moves in step with interest rate expectations for the Fed, slipped 8.7 bps to 4.648 per cent. Seven-year US yields mostly held their decline following a seven-year note Treasury auction that priced at market.

A closely watched part of the US Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes, seen as an indicator of economic expectations, was at 33.0 basis points. It hit 34.10 on Wednesday.

The breakeven rate on five-year US Treasury Inflation-Protected Securities (TIPS) was last at 2.480 per cent after closing at 2.497 per cent on Wednesday. The 10-year TIPS breakeven rate was last at 2.357 per cent, indicating the market sees inflation averaging about 2.4 per cent a year for the next decade.


Why are US Bond Treasury Yield Notes Down?

US Treasury yields fell on Thursday as investors digested in-line US inflation data and more AI-related jitters in equities, a day after the Federal Reserve held interest rates steady.

Expectations for a rate hike in December were still high but down from earlier in the day. Rate futures were last pricing in about a 78 per cent chance of a 25-basis-point hike at the Fed's next meeting in December, according to CME's FedWatch tool, down from about 83 per cent before Thursday's inflation and growth data.

Results from Alphabet late Wednesday rekindled worries about AI spending and pushed stocks down. A week ago, bond prices rose, pushing yields lower after a report from key AI player Meta Platforms, which triggered a selloff in stocks and made safe-haven bonds more attractive.

Economic Data

Yields fell further in early trading after the day's economic data, including the report showing the Personal Consumption Expenditures Price Index — the Fed's preferred inflation gauge — climbed 0.5 per cent last month, in line with economists' expectations. A separate report showed that the US economy grew faster than expected in the third quarter, with gross domestic product increasing at a 3.4 per cent annualized rate last quarter.

Peter Cardillo, chief market economist at Spartan Capital Securities, said that with the GDP data "we had good numbers in GDP growth, but most of that came in the form of growth of spending in AI."

On Wednesday, longer-dated US yields rose while two-year yields eased after the Fed left rates unchanged, as expected, and also upgraded its assessment on the economy. The European Central Bank on Thursday also left rates unchanged.

The US central bank in September raised rates for the first time in three years in an effort to control high inflation tied in part to rising energy prices and the AI boom.