Bonds

Treasury yields fall, giving back some of Monday's jump

U.S. Treasury yields fell on Tuesday, giving back some of the gains seen in the previous session, after economic data hinted that the Federal Reserve may need to hike rates for longer.

The yield on the benchmark 10-year Treasury fell by roughly 7 basis points to trade at 3.526%. The 2-year Treasury yield was last down by around 3 basis points to 4.362%.

Yields and prices move in opposite directions and one basis point equals 0.01%.

Treasurys


The move in yields followed a slew of economic data releases that hinted at a robust economy despite the Fed's rate hiking campaign. Some investors believe that this resilience could mean that the central bank needs to hike rates further, or keep them higher for longer to slow inflation.

So far this year, the Fed has implemented four consecutive 75 basis point rate hikes, prompting concern among investors about the pace of rate hikes and their potential to drag the U.S. economy into a recession.

Commentary from Fed officials in recent weeks suggests rates will go higher still, although the central bank is widely expected to announce a 50 basis point hike at the conclusion of its December policy meeting next week.

Despite the weekly moves, Treasury yields have pulled back sharply since hitting fresh highs a little over a month ago. That may signal a potential rally ahead for equities, said KKM Financial's Jeff Kilburg.

"The relief in the Treasury market has not trickled into the equity markets," he said, adding that equities trade in a lag. "That's where the next move higher is, due to the fact that these yields have finally relented."