The yield on the 2-year Treasury note inched higher on Friday as investors assessed the possibility of further interest rate hikes following the release of strong economic data.
The 2-year Treasury yield rose nearly 4 basis points to 4.993%. The yield on the 10-year Treasury was flat at 4.262%.
Yields and prices have an inverted relationship and one basis point equals 0.01%.
Fears of more rate hikes have mounted this week as several economic data points suggested sustained inflationary pressures and tightness in the labor market. This included initial weekly jobless claims data that came in below expectations. Cooling the labor market has been a key aim for the Federal Reserve alongside easing inflation.
The central bank has followed a restrictive monetary policy approach since early 2022, implementing a series of rate hikes to tamp down sticky prices. The prospect of more hikes, or elevated rates for longer, has fueled concerns of a potential economic downturn.
While markets widely expect the Fed to leave rates unchanged at its September meeting, expectations for a November rate hike have been on the rise, with traders pricing in a roughly 42% chance, according to CME’s FedWatch tool.
Investors are gearing up for key data releases next week, including the latest consumer and producer price index reports. Several Fed policymakers said earlier this week that inflation data would be key for their decision-making going forward.
Source : CNBC