By Vivien Lou Chen
Instead of falling as Wall Street braces for another Fed rate cut next week, the 10-year Treasury yield rose 12 basis points for the week to almost 4.14%, the most since April
Recent U.S. economic data has bond-market participants uncertain about the Federal Reserve’s ability to cut interest rates next year.
In a bad sign for anyone looking for a reprieve from higher borrowing costs, longer-dated U.S. government debt sold off sharply this week.
The 10-year note and 30-year bond had their worst weekly performances since April and May on conflicting economic data that is sowing doubts about how much the Federal Reserve can cut interest rates in 2026.
Traders widely expect a quarter-point rate cut next week that will push the central bank’s main policy target down to between 3.5% and 3.75%. But they were less certain about next year and see a decent chance that the central bank won’t cut rates again through next March.
Benchmark yields are significant to households, businesses and governments because they influence the cost of borrowing on everything from mortgages, auto loans and credit cards to capital projects, while also affecting interest payments on the national debt.
On Friday, the 10-year Treasury yield BX:TMUBMUSD10Y rose 12 basis points for the week to almost 4.14%, the most for any week since April, according to Dow Jones Market Data. The yield on the 30-year bond BX:TMUBMUSD30Y advanced by a similar amount to almost 4.8%, the biggest weekly increase since May. Yields move in the opposite direction to prices, so a rise in these rates is a reflection of the selloffs that took place in the underlying government maturities.
“Yields are heading back to the higher end of the range that we’ve seen since summer,” said Tom Nakamura, a currency strategist and co-head of fixed income at AGF Investments in Toronto, which had almost $43.6 billion (C$60.4 billion) in assets under management and fee-earning assets as of November.
“One of the things driving this is some of the economic data, like jobless claims and University of Michigan consumer sentiment, which are showing resilience and may curtail the Fed from easing much further,” he said.
Data released on Thursday showed initial jobless claims fell to a more than three-year low of 191,000 in the week that ended Nov. 29. On Friday, the University of Michigan’s consumer-sentiment reading inched up by 2.3 points to 53.3 for December, and the rate of U.S. inflation based on the personal consumption expenditures index for September remained stable.
On a more downbeat note, however, payroll processor ADP reported that privately run businesses eliminated 32,000 jobs in November, for the biggest decline since the spring of 2023.
Meanwhile, bond traders are keeping an eye on rising Japanese yields and the possibility of a rate hike by the Bank of Japan later this month. Concerns are that Japan’s bond-market developments, triggered by worries over economic-stimulus efforts under Prime Minister Sanae Takaichi, might lead to higher yields in the U.S.
Read: Investors are worrying about potential spillover from surging Japanese bond yields. Here’s a breakdown of what matters.
“Globally, we’re seeing some pressure on bonds from fiscal policy – for example, in Japan, with yields on Japanese government bonds rising because the country’s fiscal policy is seen as adding to inflation concerns,” Nakamura said via phone. “The market will tend to focus on fiscal concerns in waves. And as they get highlighted in one market, this tends to shine a light on others as well, particularly in countries where fiscal policy has been more stimulative, such as the U.S.”
On Friday, 1- through 30-year yields finished broadly higher. All three major U.S. stock indexes ended in the green, with the S&P 500 SPX and Nasdaq COMP each securing a fourth day of gains.
-Vivien Lou Chen
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12-05-25 1626ET
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