10-Year Yield Extends Yesterday’s Slump, Closing Below 3%

Treasuries showed a substantial move to the upside during trading on Thursday, extending the notable advance seen in the previous session.

After an initial jump, bond prices saw further upside as the day progressed. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, tumbled by 12.1 basis points to 2.972 percent.

The ten-year yield added to the 11.3 basis point drop seen on Wednesday, closing below 3 percent for the first time in almost a month.

Treasuries continued to benefit from their appeal as a safe haven amid lingering concerns about the global economic outlook and the possibility of a recession.

Central bank chiefs have recently reaffirmed their resolve to bring down inflation despite threats to economic growth.

A report from the Commerce Department provided further evidence of an economic slowdown, showing personal spending increased by less than expected in the month of May.

The Commerce Department personal spending edged up by 0.2 percent in May after climbing by a downwardly revised 0.6 percent in April.

Economists had expected personal spending to increase by 0.5 percent compared to the 0.9 percent advance originally reported for the previous month.

Real personal spending, which excludes price changes, fell by 0.4 percent in May after rising by 0.3 percent in April.

“The larger than expected 0.4% fall in real consumption in May, together with downward revisions to gains in previous months, means we now expect consumption to rise by just 0.8% annualized in the second quarter, down sharply from our previous estimate of close to 3.0%,” said Michael Pearce, Senior U.S. Economist at Capital Economics.

He added, “As a result, second quarter GDP growth is now on track to be closer to 1.0% annualized, down from our previous estimate of 2.7%, and we expect growth to remain below trend over the second half of the year too.”

While the report also showed a slowdown in the annual rate of core consumer price growth, Pearce said the data does not present the “clear and compelling” evidence the Federal Reserve needs to shift to less aggressive rate hikes.

Trading on Friday may be impacted by reaction to reports on manufacturing activity and construction spending, although activity may be somewhat subdued ahead of the long weekend.

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