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Bond Report: Most Treasury yields decline as first-quarter GDP is revised lower and recession worries continue

Bond yields eased on Wednesday, as traders waited to parse a batch of US economic data that may provide further clues to the pace of rate rises by the Federal Reserve.

What’s happening?

The yield on the 2-year Treasury
TMUBMUSD02Y,
3.089%
,
eased 6 basis points to 3.089%, down from 3.122% at 3 p.m. Eastern on Tuesday. Yields move in the opposite direction to prices.

The yield on the 10-year Treasury
TMUBMUSD10Y,
3.154%
,
fell 6 basis points to 3.158%, down from 3.206% on Tuesday.

The yield on the 30-year Treasury
TMUBMUSD30Y,
3.269%
,
was down 5 basis points to 3.272%, down from 3.311%.

What’s driving markets?

Benchmark 10-year yields are sitting about 30 basis points shy of the multiyear high reached a few weeks ago, seemingly rangebound as investors struggle to assess how much the central bank will tighten policy amid burgeoning inflation and an economic slowdown.

Data and central bank comments may provide a guide.

The final reading of U.S. first quarter GDP is due for release before Wall Street opens for action on Wednesday. The world’s biggest economy is expected to have shrunk 1.5% on an annualized basis. Thursday will bring PCE prices data, a report that will be closely monitored by Federal Reserve chairman Jay Powell.

Powell is due to speak ahead of the market open from the European Central Bank conference in Sintra, Portugal, and the market will be eager to see if he gives any policy hints.

Later on Wednesday, ECB President Christine Lagarde will also give a speech, and ahead of her comments, the German 10-year bund yield
TMBMKDE-10Y,
1.555%

was down 6 basis points to 1.56%.

The European benchmark’s yield started 2022 about a dozen basis points in negative territory, but has risen sharply as higher energy costs, following to Russia’s invasion of Ukraine, have delivered a broad inflationary spike to the eurozone.

Indeed, a report on Wednesday showed prices in Spain rising by 10.2% in June, their fastest pace in 37 years. However, Spain’s 10-year bond yield
TMBMKES-10Y,
2.632%

was off 11 basis points to 2.635%, suggesting that the more than 200 basis point rise in yields since the start of the year has already partially discounted such news.

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