Bond yields rose on Friday, extending the sell-off in fixed income following another round of solid US economic data.
What is going on
-
The yield on the 2-year government bond BX:TMUBMUSD02Y was 5.05%, an increase of 3.8 basis points. Yields move in the opposite direction of prices.
-
The yield on the 10-year government bond BX:TMUBMUSD10Y was 4.32%, an increase of 2.2 basis points.
-
The yield on the 30-year government bond BX:TMUBMUSD30Y was 4.4%, an increase of 1.8 basis points.
What drives the markets?
Thursday’s reports showed a stronger-than-expected increase in retail sales, albeit driven by gasoline sales, alongside producer price data that met expectations. Economists at Mizuho say annual inflation-adjusted consumption appears likely at 3.5%, making it likely that GDP will exceed 2.5% in the third quarter.
Friday’s economic calendar includes the Empire State manufacturing index, industrial production and the preliminary release of the University of Michigan’s consumer confidence index.
There is also the symbolism of the United Auto Workers strike, which has begun at a plant of each of the three major U.S. auto companies, which could raise concerns about wage growth and its impact on inflation.
Next week’s Federal Open Market Committee decision looms. Although there is virtually no chance of an interest rate increase, the central bank will update its economic and interest rate forecasts.