Treasury yields rose on Thursday as investors digested Fitch Ratings’ decision to cut the U.S.’ long term foreign currency issuer default rating and assessed fresh economic data.
The 10-year Treasury was up about 10 basis points at 4.175%, trading around levels last seen in November 2022. The yield on the 2-year Treasury added 2 basis points to 4.91%.
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Yields and prices move in opposite directions. One basis point equals 0.01%.
Investors considered what could be next for the U.S. economy as they weighed recent developments and key economic data.
“Our view is that the curve steepening reflects favorable macro conditions and while higher 10yr yields undermines stock valuations, the Treasury drop is happening for ‘good’ reasons,” said Vital Knowledge’s Adam Crisafulli in a Thursday note.
Earlier this week, Fitch Ratings announced that it had downgraded the long-term foreign currency issuer default rating for the U.S. from AAA to AA+, citing “fiscal deterioration” and concerns about governance standards and growing general debt.
Investors also assessed a series of economic data prints that offered fresh hints about the state of the labor market and could inform the Federal Reserve’s next interest rate decision. This included in-line jobless claims numbers and stronger-than-expected productivity data for the second quarter.
All this comes after Wednesday’s stronger-than-expected ADP report and ahead of Friday’s July jobs data.
Also on Thursday, the Bank of England announced a 25 basis point hike as it continues to battle persistently high inflation.
