On Wednesday, Treasury yields were choppy as investors tried to assess the future of the economy amidst concerns regarding recession and a potential debt ceiling. As of 4:27 a.m. ET, the 10-year Treasury yields were down by almost two basis points, totaling 3.5301%. However, the two-year Treasury yield increased by just over a basis point, reaching 4.0886%. This meant that yields and prices were reversed. It’s important to understand that one basis point equals 0.01%.
Investors were worried about the current state of the U.S. economy as negotiations continued, but some did suggest that some progress was being made. This is important since a solution must be found by June 1st or else lawmakers risk the U.S. defaulting on its debt. Elsewhere, there continued to be speculation over what the Federal Reserve’s interest rate policy would be next.
Investors were hoping for a rate cut later this year after relatively recent data showed that inflationary pressures eased. However, Cleveland Fed President Loretta Mester announced on Tuesday that she did not believe that the Federal Reserve had reached a level where it could cut interest rates. This statement echoes comments made by others within the Fed’s higher ranks, which suggest that more effort will be needed to curb inflation and limit rate hikes.
Some other Fed speakers have cautioned that the impact of higher interest rates will not be fully felt. On Wednesday, investors continued to look out for prospective comments from the Fed speaker, in addition to the possible release of building permits and housing starts for April.