US 10-year Treasury yields started the day at 4.22% but have since risen to 4.32%. The reasons for this upward trend are not entirely clear, but there are several factors that could be influencing it.
Firstly, the recent non-farm payrolls report may have played a role. Although the data was affected by hurricanes and strikes, the market seems to interpret it as a sign of a strong job market. This positive perception could be pushing yields higher.
Another factor to consider is the unexpected increase in ISM prices paid, which points to potential inflation risks on the horizon. This development might be causing investors to demand higher yields to offset the effects of rising prices.
Additionally, the upcoming election could be contributing to the rise in Treasury yields. While recent polls show a shift towards Harris, Trump is still seen as the favorite. If he were to win and Republicans were to sweep the election, it could result in larger deficits, prompting investors to seek higher returns on their investments.
Moreover, various economic reports have indicated uncertainty in both business and consumer spending leading up to the election. Once the political landscape becomes clearer, there may be a surge in economic activity, prompting investors to adjust their positions accordingly.
On a more positive note, strong earnings from Amazon have highlighted the resilience of the consumer sector. This robust performance could be boosting confidence in the overall economy, leading to higher yields on Treasury bonds.
Lastly, the start of a new month often brings selling flows, especially from overseas investors. These foreign outflows could be putting upward pressure on yields as demand for US Treasuries weakens.
As a result of these combined factors, the dollar has strengthened across the board, with USD/JPY seeing a significant increase from its lows after the non-farm payrolls report. This upward momentum in yields and the dollar suggests that investors are adjusting their positions in response to changing market conditions.
