Treasury Yields Hold Steady on the Lack of Market-Moving Catalysts

On Friday morning, U.S. government debt yields inched up slightly but stayed within a narrow range due to a lack of major economic data releases. Traders were instead focusing on potential developments over the weekend in the presidential campaign.

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Current Yield Movements

• 2-year Treasury note (BX): Increased by 2.6 basis points, reaching 4.485%, up from 4.459% on Thursday.
• 10-year Treasury note (BX): Rose by 1.9 basis points to 4.207%, compared to 4.188% the previous day.
• 30-year Treasury note (BX): Gained 1.5 basis points, settling at 4.420%, up from 4.405% on Thursday.

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Market Drivers

The yields on Treasury notes remained relatively stable following a "remarkably" rangebound session on Thursday, according to BMO Capital Markets strategists Ian Lyngen and Vail Hartman. The lack of significant economic data on Friday had traders looking forward to the upcoming second-quarter gross domestic product (GDP) report, scheduled for next Thursday.

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Additionally, market participants were closely watching for any weekend developments in the U.S. presidential race. The race features Republican nominee Donald Trump and President Joe Biden, with mounting pressure on Biden to consider withdrawing from the race. This political uncertainty has added a layer of potential volatility to the market.

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Lyngen and Hartman highlighted the sensitivity of U.S. rates to political headlines, noting the potential for increased short-term volatility. They observed, “The dearth of top-tier data, combined with the fact U.S. rates have been particularly headline-sensitive as it relates to U.S. politics, suggests an increase in near-term volatility may be on offer.”

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They further remarked on the critical timing for the Democratic Party, stating, “It would be an understatement to suggest the Democrats have reached the 11th hour for changing candidates and, as a result, the market remains on headline watch for any announcements or developments in this regard — even as conventional wisdom suggests such a shift wouldn’t be advantageous timing-wise.”

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Separately, a significant IT outage caused by a CrowdStrike cybersecurity platform issue disrupted airlines and various companies globally. Despite the widespread impact, this event did not appear to affect financial-market trading on Friday.

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Overall, the trading environment was characterized by a cautious wait-and-see approach as traders anticipated the next key economic data release and remained alert to any political developments that could influence market dynamics. The subdued movement in Treasury yields reflected a broader market hesitation amid the backdrop of political uncertainty and the absence of immediate economic indicators.

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