Bond Rally Resumes as 30-Year U.S. Treasury Yield Hits Lowest Level Since July

30-year Treasury yield hits lowest rate since July as bonds resume rally. Swap rates and Treasury yields reversed yesterday’s move and then some, declining across the curve and pulling 30-year rates to 1.82%- the lowest they’ve been since July. The 10-year Treasury yield declined 5bps to close at 1.44% while the MOVE Index (a measure of interest rate volatility) ticked higher to 73- near the YTD highs. Inflation continues to be the focus of the market and all eyes will be on tomorrow’s awaited Consumer Price Index report.

Producer prices matched analysts’ estimates for October with headline producer prices increasing 8.6% on an annualized basis. The year-over-year increase is the largest since 2010- higher energy costs being the primary driver. Supply chain disruptions also increased trucking freight costs by 2.5% (month-over-month), the highest increase on record. Thus far, companies have been successful in passing higher input costs to consumers. The consumer price index will be released tomorrow, forecasts calling for annualized inflation to hit 5.9%.

Fed Reserve Governor Lael Brainard floated as a potential Powell replacement as Fed Chair News broke today that Governor Brainard was interviewed last week during her visit to the White House. Swap rates and Treasury yields fell on the report as investors view Brainard would be less aggressive with rate hikes and would likely keep rates lower for longer. President Biden said earlier this month he will soon announce his nomination, which most expect to be before Thanksgiving.