U.S. Treasury Yields Rise Amid Stronger Home Sales and Looming Government Shutdown
U.S. Treasury yields climbed on Wednesday as investors monitored upcoming economic data and weighed the risk of a federal government shutdown next week. The 10-year Treasury yield increased more than three basis points to 4.149%, while the 2-year yield rose to 3.606%. Even the 30-year Treasury bond saw a modest uptick to 4.754%, signaling cautious optimism in the bond market.
The uptick in yields followed encouraging data on new home sales, which reached 800,000 in August—well above economists’ expectations of 650,000. Jeffrey Roach, chief economist at LPL Financial, noted that “if housing recovers, the economy will more likely skirt a recession, and risk assets historically perform well in a non-recessionary rate-cutting cycle.” Strong housing figures are being seen as a potential boost to economic growth in the months ahead.
Investors are closely watching additional data releases this week, including existing home sales and the second-quarter GDP growth rate on Thursday. However, the most anticipated report is Friday’s personal consumption expenditures (PCE) index, a key inflation gauge favored by the Federal Reserve. Analysts say the PCE index will provide critical insight into price pressures and the overall health of the U.S. economy.
Federal Reserve Chairman Jerome Powell highlighted the delicate balance facing policymakers in a speech to business leaders on Tuesday. He said that “near-term risks to inflation are tilted to the upside and risks to employment to the downside,” explaining that recent interest rate cuts were driven by labor market weakness despite ongoing inflation concerns.
Adding to market uncertainty, a potential federal government shutdown looms after President Donald Trump canceled planned meetings with top Democrats in Congress. Lawmakers were attempting to pass a stopgap funding deal that included protections for healthcare programs, including extensions to the Affordable Care Act, enhanced tax credits. Investors are now factoring in these political risks as they assess market and economic trends.
source: cnbc