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Treasury yields rise as Fed concerns outweigh weak economic data

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NEW YORK, Oct 24 – U.S. Treasury yields rose on Monday as investors remained concerned the Federal Reserve would remain too tough on inflation despite economic data pointing to to a slowdown in business activity in October.

* Some signs that the central bank is debating how much higher it can safely push borrowing costs gave some support to Treasuries late last week. San Francisco Fed President Mary Daly said Friday that the time had come to start talking about “reducing” rate hikes.

* The market expects the Fed to raise rates by 75 basis points next week, but investors will be watching closely for any hint of a softer approach to future hikes.

* Treasuries – whose yields move inversely with prices – fell on Monday, reversing earlier gains, as investors were skeptical of a significant change in the Fed’s stance.

* “Equities have been a bit bullish lately, so risk appetite is a bit higher,” said Jake Jolly, investment strategist at BNY Mellon Investment Management. “But if we step back, it’s hard to see substantial change and the macroeconomic outlook suggests things haven’t changed much,” he added.

* Yields fell after an S&P Global survey on Monday showed US business activity contracted for the fourth straight month in October.

* But then they rose again, with the benchmark 10-year yield at 4.269%, some 6 basis points higher than its Friday close. The yield on the two-year note was trading at 4.515%, some 2 basis points higher than on Friday.

* At the long end of the curve, the 30-year bond yield hit a high of 4.403% on Monday, the highest since 2011.

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