Treasuries Give Up Most of CPI-Driven Gains Amid Approaching Auction
U.S. Treasury bonds closed nearly flat on Friday, with yields deviating by less than 1 basis point from the previous close, gradually erasing most of the gains triggered by weaker-than-expected September CPI data. The U.S. Treasury auction cycle for next week begins on Monday with the issuance of 2-year and 5-year bonds, putting pressure on the market. Due to the U.S. government shutdown, most economic data, including employment figures, were not released, leaving traders’ bets unchanged on a 25-basis-point rate cut by the Federal Reserve at both its Wednesday meeting and in December. Interest rate volatility indicators remained near multi-month lows touched on October 3.
Shortly after 3 p.m. New York time, Treasury yields showed mixed movements, all within narrow ranges, with the 10-year yield hovering near 4% after earlier falling to 3.96% following the release of the CPI report; spreads steepened slightly but remained far below intraday highs.
Overnight index swaps (OIS) contracts tied to the Fed’s policy meetings also closed nearly unchanged, fully pricing in expectations for rate cuts at both remaining meetings this year, with the terminal federal funds rate forecasted to reach approximately 2.90% by mid-2026.
As of 3 p.m. Eastern Time, trading volume in U.S. Treasury futures during the U.S. session was about 15% higher than the 20-day average, with activity concentrated primarily in 5-year and 10-year contracts.
By 4:48 p.m. Eastern Time, the yield on the 2-year U.S. Treasury note fell 1.07 basis points to 3.4778%.
The yield on the 5-year U.S. Treasury note dropped 0.53 basis points to 3.6036%.
The yield on the 10-year U.S. Treasury note declined 0.21 basis points to 3.9988%.
The yield on the 30-year U.S. Treasury bond rose 1.23 basis points to 4.5909%.
The spread between the 2-year and 10-year U.S. Treasury yields widened by 0.86 basis points to 51.462 basis points.
The spread between the 5-year and 30-year U.S. Treasury yields increased by 1.76 basis points to 98.559 basis points.
