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Bond Report: 10-year Treasury yield holds steady at 2.75% after Fed’s May minutes

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Treasury yields were lower Wednesday morning as concerns about U.S. economic growth weighed on markets and investors awaited the release of minutes from the Federal Reserve’s May 3-4 policy meeting.

What yields are doing

The yield on the 10-year Treasury note
TMUBMUSD10Y,
2.761%

was at 2.738%, down from 2.758% at 3 p.m. Eastern on Tuesday.

The 2-year Treasury note yield
TMUBMUSD02Y,
2.516%

was at 2.48% versus 2.483% Tuesday afternoon.

The yield on the 30-year Treasury bond
TMUBMUSD30Y,
2.975%

was at 2.97%, compared with 2.971% late Tuesday.

What’s driving the market

Treasury yields trended lower Wednesday morning amid worry over U.S. economic growth prospects, which contributed to a renewed equity selloff on Tuesday that sent the S&P 500 down 0.8% and the Nasdaq Composite to its lowest close since Nov. 3, 2020.

The S&P 500
SPX,
+0.82%

and Dow Jones Industrial Average
DJIA,
+0.39%

are on track for their worst first 100 trading days to start a year since 1970, while the Nasdaq Composite
COMP,
+1.43%

is set for its worst start in history.

Data released Wednesday showed that U.S. durable goods orders rose 0.4% in April, signaling the economy was still growing at a steady pace in the early spring. Still, it was one on the weakest readings of the past seven months.

Investors remain focused on inflation and the debate over the Federal Reserve’s ability to bring price pressures under control without sinking the economy into recession. The central bank, which is set to begin unwinding its balance sheet on June 1, delivered a half percentage point rate increase earlier this month following a more traditional quarter-point, or 25 basis point, hike earlier this year. Fed officials have signaled at least two more half-point rises are in store.

See: Markets are imploding because the Fed isn’t doing its job, says billionaire investor Bill Ackman

Minutes of the May 3-4 Fed meeting, set for release at 2 p.m., will be watched for clues to the Federal Reserve’s path of tightening. Fed Vice Chair Lael Brainard is scheduled to speak at 12:15 p.m.

What analysts are saying

The minutes “will likely reinforce the view that additional 50 basis point rate hikes will be needed in the next two meetings, although the rate path after that becomes a lot foggier,” said Raffi Boyadjian, lead investment analyst at XM, in a note.

Policy makers’ views “on how quickly they anticipate inflation to come down as well as any potential revelations on the balance sheet reduction, such as the possibility of the outright sale of assets, particularly of mortgage backed securities, will be scrutinized by investors,” the analyst said.

Strong insider buying suggests a 15% rally in the S&P 500 from here

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