Treasury yields rose Friday morning, extending moves seen in the prior session, as the United Auto Workers went on strike, raising concerns about a return of price pressures in the auto sector.
What’s happening
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The yield on the 2-year Treasury
BX:TMUBMUSD02Y
was 5.016%, up less than 1 basis point from 5.011% on Thursday. -
The yield on the 10-year Treasury
BX:TMUBMUSD10Y
was 4.315%, up 2.6 basis points from 4.289% Thursday afternoon. -
The yield on the 30-year Treasury
BX:TMUBMUSD30Y
was 4.407%, up 2.3 basis points from 4.384% late Thursday.
What’s driving markets
Almost 13,000 U.S. auto workers went on strike Friday after the Big Three and the United Auto Workers failed to reach an agreement before their national contract expired just before midnight. The union is asking for double-digit wage increases, an end to tiered wages and benefits, the restoration of pensions and cost-of-living adjustments, retiree pay increases and more.
The limited strike, which is taking place while negotiations reportedly continue, has the potential to disrupt auto-industry production if it continues. It may also lead to significant upside risk to motor vehicle prices, according to economists Murat Tasci and Daniel Silver at JPMorgan Chase.
In Friday’s U.S. economic updates, the New York Empire State manufacturing index rebounded in September to 1.9 as new orders and shipments increased. Separately, U.S. industrial production rose 0.4% for August.
Next week’s Federal Reserve policy meeting decision on interest rates is looming. While there’s virtually no chance of a rate hike, the central bank will be updating its economic and rate forecasts.
Read: Fed preview: Powell will try not to upset the apple cart
Thursday’s U.S. reports showed a stronger-than-expected rise in retail sales and producer prices for August.
What analysts are saying
“Big economic releases this week failed to shift Fed expectations much or shake bond yields out of relatively narrow ranges since the middle of last week. Treasury yields oscillated in choppy trading yesterday morning following a nuanced retail sales report, faster-than-expected PPI inflation, and a slight increase in weekly jobless claims,” said Will Compernolle, macro strategist at FHN Financial in New York.
“Markets are effectively certain the Fed will leave rates unchanged next week, and the odds of an additional hike this year are still roughly a coin toss after this week’s data,” Compernolle wrote in an email. “Notably, the highest probability for an additional hike, according to fed funds futures trading, is now at the December meeting instead of the November meeting, a slight change from the past four months, although a few percentage points in market-implied probability doesn’t mean very much.”
