NEW YORK- US Treasury yields tumbled on Friday from multi-month highs as investors consolidated positions after a week-long run-up, with the market having fully priced in the shift in the Federal Reserve’s monetary policy outlook to a gradual easing path.
US two-year yields slid from a 2-1/2-month high, while those on the three-year five-year and seven-year notes dropped from nearly three-month peaks.
“The shift in Fed outlook to a less aggressive easing path has been priced in, and bargain hunters, short coverers are moving in after rates cheapened to multi-month highs,” said Kim Rupert, managing director of global fixed income analysis at Action Economics in San Francisco.
A combination of less dovish Fed comments late on Thursday and those from European Central Bank officials earlier on Friday helped push Treasury yields higher, before they faded and traded lower.
ECB President Christine Lagarde called the relatively benign fourth-quarter wage growth data “encouraging” but not yet enough to give the central bank the confidence that inflation has been defeated.
Bundesbank President Joachim Nagel, a member of the ECB’s Governing Council, backed Largarde’s view. Nagel said the ECB should resist the temptation to cut interest rates early. – Reuters