US Treasury yields were little changed Friday as investors assessed the latest government bond auction, easing oil prices and President Donald Trump’s pledge to delay potential strikes against Iran until after next month’s midterm elections.
The benchmark 10-year Treasury yield was flat at 5.26%, while the 30-year yield held at 5.63%.
| US Treasury bond | Yield | Day change | Month change |
|---|---|---|---|
| 2-year | 4.80% | +0.035% | +0.207% |
| 10-year | 5.26% | +0.022% | +0.288% |
| 30-year | 5.63% | +0.016% | +0.257% |
The two-year yield, which is more sensitive to expectations for Federal Reserve policy, rose more than 2 basis points to 4.7827%.
The moves followed a retreat in yields during the previous session, after longer-dated borrowing costs reached their highest levels in decades earlier in the week.
Investors are weighing persistent inflation, government borrowing needs and the outlook for interest rates, with billionaire investor Ray Dalio warning that the same forces supporting stocks could eventually leave equities more vulnerable.
Bond auction provides some support
The Treasury market received some support from Thursday’s $22 billion sale of 30-year notes.
Indirect bidders, a category that includes foreign central banks, purchased more than 72% of the offering, above the average of 68% across the previous 10 auctions.
The Treasury Department also sold $39 billion in 10-year notes on Wednesday.
The latest auction results offered a measure of support for longer-dated government debt after a sharp selloff pushed yields to multi-decade highs.
However, demand at a single auction does not resolve the broader concerns facing the bond market.
Investors remain focused on the scale of US government deficits, persistent inflation and the potential for additional Federal Reserve rate increases.
Federal Reserve Governor Christopher Waller said earlier that further rate hikes might be necessary to tackle inflation, which has remained above the central bank’s 2% target for more than five years.
Speaking at a Central Bank of Turkey forum in Istanbul, Waller also indicated that additional increases would not necessarily need to happen immediately.
Trump comments ease oil pressure
Energy prices moved lower after Trump said Thursday that the US would not launch strikes against Iran before next month’s midterm elections.
The remarks struck a more diplomatic tone amid signs of weakening public support for the conflict in the Middle East, which began on February 28.
West Texas Intermediate crude futures fell 0.79% to $90.77 a barrel, while Brent crude declined 0.99% to $103.25.
Oil prices have risen sharply since the conflict began, adding to concerns that higher energy costs could keep inflation elevated and complicate the Federal Reserve’s policy decisions.
The prospect of further military action has also contributed to uncertainty across financial markets, particularly as investors assess the potential impact on energy supplies and global economic growth.
Trump’s comments helped ease some of that pressure, although the broader outlook for oil and inflation remains uncertain.
Dalio warns of growing pressure on equities
Against this backdrop, Ray Dalio warned that stocks could face increasing pressure from rising bond yields and weaker corporate cash flows, even if earnings continue to grow.
The Bridgewater Associates founder told CNBC at the Milken Institute Asia Summit in Singapore that equities had so far weathered the global bond selloff because earnings growth had kept expected stock returns attractive relative to bonds.
But he warned that this cushion could diminish as financial conditions tighten.
“We’re in the part of the cycle where interest rates can rise without sending the equity market down because there’s enough earnings growth and there’s enough expected return,” Dalio said.
“But when that cushion comes down, then you’re coming later into that cycle. So that’s where we are.”
His comments highlight a potential challenge for equity markets.
Rising Treasury yields increase the returns investors can earn from government debt, potentially making stocks less attractive unless corporate earnings growth remains strong enough to compensate.
Higher borrowing costs can also increase financing expenses for companies and weigh on future cash flows, particularly for businesses whose valuations depend heavily on earnings expected years into the future.
This post US Treasury yields show signs of stability on Friday may be modified as updates unfold
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