US 10-year yields fall below 4%

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Softer data on jobs and wage growth have pushed US 10-year yields below 4%. They briefly cracked that level earlier before bouncing but a second push lower has followed the data and quarterly Treasury borrowing numbers that didn’t meaningfully boost long-dated issuance.

Is that it for the bounce? Earlier this month, US 10s rose to 4.2% after touching 3.8% in late December but yields have moved meaningfully lower for three days. The dip started on Monday after the Treasury announced lower borrowing for Q1 and Q2.

The next move hinges on the Fed. There’s a line of thinking that Powell and the FOMC won’t be as dovish as hoped and push back on the 40% chance of a hike priced in for March. However there are others who believe that by holding rates higher for longer, the Fed will ultimately snuff out growth, leading to deeper cuts and lower inflation later.