Bond Report: 10-year Treasury yield ends at one-week low after briefly surpassing 5%

The key 10-year Treasury yield finished at a one-week low after briefly breaking through 5% on Monday, as traders assessed the war in the Middle East and questions about the continued strength of the U.S. economy.

What happened

  • The yield on the 2-year Treasury
    declined 2.2 basis points to a more-than-one-week low of 5.06% from 5.082% on Friday. Yields move in the opposite direction to prices.

  • The yield on the 10-year Treasury
    fell 8.8 basis points to 4.836% from 4.924% on Friday, after touching an intraday high of 5.022% on Monday. Monday’s level is the lowest since Oct. 16, based on 3 p.m. Eastern time figures from Dow Jones Market Data.

  • The yield on the 30-year Treasury
    dropped 9.9 basis points to 4.988% from 5.087% on Friday.

What drove markets

The 10-year yield briefly pulled back from the 5% level on Monday as investors and traders readjusted their thinking about the recent sharp rise in long-term interest rates.

Yields have climbed for months as the result of what Federal Reserve officials, including Chairman Jerome Powell, and some investors see as rising term premiums — the unobservable compensation that investors require for bearing the risk that rates may change over the long term.

However, some analysts said the rise in yields may have gone a bit to far, considering the current state of the U.S. economy. Bill Gross, co-founder of fixed-income investing giant Pacific Investment Management Co., said Monday in a post on social-media platform X that the U.S. economy is likely headed for a recession by year-end.

The Fed’s next decision comes on Nov. 1, with traders expecting the central bank to pause and wait for more data before the December meeting.

Geopolitics appeared to be playing less of a role in Monday’s Treasury-market moves as traders monitored diplomatic efforts in the Middle East. Meanwhile, the Bank of Israel opted to hold interest rates at 4.75%, two weeks after the surprise attack by Hamas.

What strategists are saying

“Bond yields are driving the markets right now, even more so than earnings. Bond yields help to determine the valuation of all risk assets and when investors can earn 5% on a government bond, that gives them an attractive alternative to stocks with lower risk,” said David Bahnsen, chief investment officer of The Bahnsen Group, a wealth-management firm in Newport Beach, Calif., with more than $4.5 billion in assets under management.


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