Treasury yields in the United States reached approximately three-week lows following the release of the latest U.S. economic data. This caused U.S. government debt to rally, resulting in significant declines in 2- and 10-year yields.
The yield on the 2-year Treasury fell 11.3 basis points to 4.531%, marking its biggest weekly decline since January 12. Similarly, the yield on the 10-year Treasury dropped 7.1 basis points to 4.180%, experiencing its largest weekly decline since February 2. These levels were the lowest for both yields since February 12.
The decrease in yields can be attributed to a mixed batch of U.S. economic data released on Friday. The Institute for Supply Management’s manufacturing index indicated that activity in the manufacturing sector contracted for the 16th straight month in February. However, S&P Global’s manufacturing purchasing managers’ index showed a slight improvement, reaching 52.2 in February compared to an initial reading of 51.5. This hinted at a quicker pace of improvement in the manufacturing sector.
In addition, consumer sentiment remained steady in February, although it slipped from January levels. The University of Michigan reported that consumer sentiment held on to gains made over the past three months. On the other hand, construction spending fell in January for the first time since December 2022.
The decline in Treasury yields comes after a period of persistent inflation concerns, which led to significant monthly gains in yields throughout February. However, the latest economic data releases provided some relief and contributed to the decline in yields.
Looking ahead, Wall Street economists predict that the Federal Reserve will not cut rates this year, considering the hot PCE price index for January, which was in line with expectations but still elevated.
Overall, the recent decline in Treasury yields reflects a cautious market sentiment following mixed economic data. Investors are closely monitoring various economic indicators to gauge the direction of the U.S. economy and potential future actions by the Federal Reserve.
