Treasury yields climb as investors assess state of the economy and debt ceiling talks continue

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U.S. Treasury yields rose on Thursday as investors considered the path for the economy as debt ceiling negotiations continued and uncertainty about the interest rate outlook intensified.

The yield on the 10-year Treasury advanced 10 basis points at 3.821%. The 2-year Treasury yield popped 19 basis points to 4.533%.

Yields and prices move in opposite directions. One basis point is equivalent to 0.01%.


Debt ceiling deal negotiations appeared to make progress, fueling hopes that a resolution would be found ahead of the June 1 deadline. A failure to do so could lead to severe economic consequences, Treasury Secretary Janet Yellen has warned.

Meanwhile, Fitch Ratings agency on Wednesday placed the U.S.' AAA rating on negative watch, noting that the ongoing debt ceiling debate increases the risk of the government not meeting some of its payment obligations. They do, however, expect a deal to be made in time, Fitch said.

Investors also digested minutes from the Federal Reserve's latest meeting published Wednesday that indicated officials are split on how to progress interest rate policy. Further rate increases therefore do not appear to be off the table ahead of the central bank's June policy meeting.

That was in line with comments made by Fed speakers in recent weeks, which have reflected varying views about whether inflation has eased sufficiently to pause or end rate increases, or if more hikes are necessary.