(Bloomberg) -- Bond yields climbed Monday as a raft of new corporate debt preceded a series of Treasury auctions and comments by Federal Reserve officials discouraged expectations for another half-point interest-rate cut.
Longer-maturity tenors rose the most, with 10- and 30-year yields reaching the highest levels since the first week of September. Monday’s corporate bond offerings include at least five with 10- or 30-year segments, or both. The Treasury’s monthly auctions of two-, five- and seven-year notes are scheduled over the coming three days.
Two-year yields at around 3.61%, relative to the Fed’s new policy rate band of 4.75% to 5%, are “fairly priced given the Fed will be easing more in November and December,” Tom di Galoma, head of fixed income at Curvature Securities, said. Longer-dated yields faced upward pressure from corporate bond sales, he said.
Long-dated yields pulled further away from short maturities, creating a steeper yield curve. The US 10-year climbed as much as 5 basis points to 3.79%, exceeding the two-year by the widest margin since 2022. The gap has widened for the past five straight weeks, the longest such streak since October 2021.
Two-year yields also climbed, though by smaller amounts, after Atlanta Fed President Raphael Bostic and Minneapolis Fed President Neel Kashkari reiterated Fed Chair Jerome Powell’s comments last week that one shouldn’t count on more half-point rate cuts.
Kashkari went further, saying he expects the Fed will do quarter-point rate cuts at each of its remaining meetings this year. By contrast, Fed Bank of Chicago President Austan Goolsbee, who also spoke Monday, said interest rates need to be lowered “significantly” to stay ahead of labor market weakness.
Still, traders slightly trimmed their expectations for rate cuts. Swaps priced in another 73 basis points of easing by year-end, implying the Fed will do one half-point and one quarter-point cut. In aggregate, Fed officials project that they’re likely to cut their benchmark to around 3.4% by the end of 2025.
Monday’s US economic data failed to provide a clear signal for yields. S&P Global’s indexes of private-sector activity for September included an unexpected drop in the manufacturing gauge, while services dipped less than anticipated.
This week’s suite of economic reports also includes details on personal income and spending, and the Fed’s preferred gauge of inflation.
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