The yield on the benchmark U.S. 10-year Treasury hit its lowest level in about two months as investors bet that the U.S. Federal Reserve's rate-hiking campaign could finally be over.
The yield on the benchmark 10-year briefly traded at 4.379%, its lowest level since Sept. 20, before bouncing back to trade around 4.44%. The 2-year Treasury yield also hit its lowest level since Sept. 1 but was last up more than 6 basis points at 4.9%.
Yields and prices have an inverted relationship and one basis point equals 0.01%.
Treasurys
Yields across the curve are down sharply for the week, after data released this week indicated that persistently high inflation could be finally be easing.
The producer price index, released Wednesday, showed a 0.5% decline in October — whereas economists had expected a slight increase. It marked the most significant fall in the index since April 2020.
Earlier this week, October's consumer price index reading also came in lower than forecast. The core consumer price index, which excludes food and energy, fell to a two-year low of 4% on an annual basis.
Weak oil prices — which look set for their fourth consecutive week of declines — have also added to the sense that inflation is likely to remain lower.
That has all boosted hopes that the Fed could decide to stop hiking interest rates, and has sparked debate on when the first cut could come.
"Speculation about a dovish pivot grew louder over the last 24 hours, as a bunch of negative data added to the sense that the Fed was done hiking rates," Deutsche Bank's Henry Allen wrote in a morning note.
"Time will tell whether that proves the case, but for now at least, it meant the 2yr Treasury yield ... almost closed at its lowest level since August, whilst investors moved to expect more aggressive rate cuts for 2024, with just under 100bps now priced in by the Fed's December meeting."
Friday's release of October's housing starts and building permits data revealed that both were stronger than expected, according to the Commerce Department. Private owned housing starts came in at a seasonally adjusted annual rate of 1.372 million, higher than the 1.35 million estimated by Dow Jones. Building permits came in at 1.487 million, also above the 1.45 million estimate.