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Treasury yields continue retreat after 10-year slips back below 5%

U.S. Treasury yields continued to moderate on Tuesday after slipping back below 5%, though they remained near 16-year highs.

At around 3:40 a.m. ET, the yield on the benchmark 10-year Treasury note was down around 2.4 basis points at 4.8145% while the yield on the 30-year Treasury bond slipped just over 3 basis points to 4.9559%. Yields move inversely to prices.

The 10-year climbed above 5% on Monday, having crossed the symbolic threshold last week for the first time since 2007, before retreating over the course of the session. Yields fell after Pershing Square’s Bill Ackman on Monday disclosed that he had covered his bond short position.

In a post on social media platform X, formerly known as Twitter, Ackman said “there is too much risk in the world to remain short bonds at current long-term rates,” tying the move to a view that bonds could soon become interesting as a safe haven with stocks remaining volatile amid widespread geopolitical risk.

Jim Reid, head of global economics and thematic research at Deutsche Bank, said in an email Tuesday that explaining and predicting the recent “wild bond market swings” was becoming increasingly tough, and that U.S. Treasurys were the “main story” in markets over the past 24 hours.

“Indeed, while it was very difficult to pinpoint the exact reasons curves steepened so much last week, even if you were sympathetic to the move, yesterday it was even harder to explain the intra-day Treasury price action as both 10 and 30yr yields traded in a near 20bps range after the former crossed 5% for the first time since 2007 in the London morning before closing at 4.85%,” Reid noted.

Markets are also contending with comments by Federal Reserve Chairman Jerome Powell from last week. Powell said the central bank would remain “resolute” in its commitment to bringing inflation down sustainably to 2% and that lower economic growth was likely needed to achieve that goal.

The Federal Open Market Committee will meet on Oct. 31 and announce its next interest rate decision on Nov. 1, having held rates steady at 5.25%-5.5% at its September meeting. Markets are all but certain that the Fed funds target range will remain unchanged next week, according to CME Group’s FedWatch tool.

On the economic data front, S&P Global’s flash purchasing managers’ index readings, a closely watched gauge of economic activity, are due to be published at 9:45 a.m. ET.

Auctions will be held Tuesday for $75 billion of 42-day Treasury bills and $51 billion of 2-year notes.

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