Treasury yields inch up with stock market gains

CNBC with Reuters


U.S. Treasury prices inched higher as the stock market rose after a few days of straight declines.

Just before market close, benchmark U.S. 10-year notes were down 2/32 in price to yield 2.603 percent, from 2.605 earlier.

U.S. 30-year bonds saw little change in price with yields hovering at 3.418 percent, from 3.412 in the afternoon.

The Federal Reserve's policy-setting panel will meet next week and is widely expected to decide to continue to pare the central bank's massive bond-buying stimulus by another $10 billion per month.

Meanwhile, Kevin Giddis, senior managing director at Raymond James, offered a different perspective.

"Following the bond markets price action today I am still very puzzled why so many still feel that the Fed is about to tighten, he told CNBC. "Maybe they are looking at a different set of data, but to me, as long as the economic indicators remain this choppy, and inflation is around the 2.00 percent level, I can't see the Fed moving sooner than the end of next year."

"In addition to the numbers, the geopolitical risk that tends to capture the bond markets' attention only increases the chance that as long as the risk off trade is favorable to Treasuries, the Fed tightening sooner seems like a frivolous prediction," Giddis said.

Less predictable and of great import to markets will be fresh economic forecasts from the policymakers, which could show officials see faster progress toward the Fed's goals of full employment and 2 percent inflation than they saw in March, the last time official forecasts were published.

Into the Futures: Fed announcement ahead

Also highly anticipated is the publication of a matrix of dots representing when each of the Fed's policymakers expect rates to begin to rise, and how quickly. Fed Chair Janet Yellen will hold a quarterly press conference, and any comments about slack in the economy or the likely path of rate hikes will be closely parsed by investors.

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The five- and seven-year tenors sold off as well. saw flat prices with yields at 1.686 percent, down from 1.700 earlier in the day, while seven-year notes declined 2/32 in price to yield 2.203 percent.

Jeff Rosenberg, chief investment strategist for fixed income at Blackrock, told CNBC before the market close for the week that the "year-end target for the 10-year is 3 to 3.25 percent."

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"The risk is not in the 10-year, the risk is in the front end of the yield curve," he said, "and I think that's going to be the story for next week."

—By with Reuters