U.S. Treasury yields fell on Tuesday as oil prices pulled back, easing after the 10-year and 30-year yields had reached multi-decade highs a day earlier. The 10-year yield dropped more than 5 basis points to 5.256%, while Brent crude traded about 2% lower at around $98 a barrel. The move matters because Treasury yields influence borrowing costs across the economy, including mortgage and auto loans.
Yields retreat after Monday’s peaks
The 10-year Treasury yield had reached its highest level since April 2002 on Monday before retreating. The 30-year yield, down more than 3 basis points to 5.625% on Tuesday, had also climbed to a level not seen since May 2002.
The shorter-dated 2-year Treasury note yield fell more than 4 basis points to 4.787%. A basis point is 0.01 percentage point, and bond prices generally move in the opposite direction to yields: when yields fall, prices rise.
Oil prices also move lower
Brent crude was down 2% at around $98 a barrel, while West Texas Intermediate futures fell 2% to around $87. The decline in energy prices coincided with Tuesday’s retreat in Treasury yields, after the bond market had sold off sharply the previous day.
Oil is closely watched by markets because energy prices can affect inflation expectations. A pullback can ease some concern about price pressures, although the figures supplied do not establish that oil alone caused the Treasury move. Both markets were adjusting after a volatile start to the week.
Services data set the backdrop
Monday’s bond-market pressure came after fresh data from the Institute for Supply Management showed cooling growth in services. The Purchasing Managers’ Index rose to 54.9 in September, nearly matching expectations but coming in just below August’s reading.
At the same time, the ISM prices index increased by 1.4 points to 74. That combination—slower services growth alongside a higher prices reading—gave investors different signals about economic momentum and inflation, as Treasury yields rose to their 24-year highs.
Investors weigh the Fed’s next steps
Traders are pricing in roughly a 78% chance that the Federal Reserve will leave interest rates unchanged at its next meeting, according to the CME Group’s FedWatch tool. That market-implied probability is not a guarantee of the central bank’s decision.
The next focus is the release of minutes from the Federal Open Market Committee’s September meeting, due on Wednesday. Investors will examine the record for clues about policymakers’ views on rates and the economic outlook; those details could influence expectations for future policy and, in turn, Treasury yields.
Takeaway: Tuesday’s fall in Treasury yields came alongside a 2% slide in both Brent and U.S. crude, but investors still face competing signals from September’s services and prices data.
References
- cnbc.com — “Treasury yields fall as oil prices continue their slide this week”
- cnbc.com — “Treasury yields slide as oil prices fall”
- marketwatch.com — “10-year Treasury yield remains below 5% as oil prices stabilize – MarketWatch”
- wsj.com — “Bond Yields Keep Rising Despite Drop in Oil Price, Dovish Fed Speech – WSJ”
- AFP.com — “Oil down, but stocks lower as bond yields rise”
