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The 2-year Treasury note yield was flat at 4.712%. The 10-year Treasury note yield rose slightly Tuesday, adding to its gains from the previous session, as traders reassessed the possibility of the Federal Reserve cutting rates in June. The ISM manufacturing index rose to 50.3, up from 47.8 in February and significantly better than the 48.1 Dow Jones consensus estimate. Markets interpreted the unexpected return of U.S. manufacturing growth "as reducing the chances of meaningful Fed rate cuts," Dutch bank ING said in a research note. The Fed also said at the time that it still expects three quarter-percentage point cuts by the end of the year.
Persons: Gregory Faranello, Jeff Cox, Fred Imbert Organizations: Federal Reserve, Dow Jones, ING, AmeriVet Securities Locations: U.S
The so-call yield curve shows investors what they can expect to earn from different maturities. The yield curve inverted before the 2020, 2009, and 2001 recessions but often with large lag times. "My contention would be that ultimately the yield curve is going to prove correct," said Gregory Faranello of AmeriVet Securities, saying it takes time for equities to catch up with what's happening with the yield curve. To be sure, equities can rally even with an inverted yield curve, and they've done that in the past. "It's very rare in a bear market that the bear doesn't even affect those companies that we were in, we believe will protect us.
Just like their longer duration brethren, the yields on short-term Treasury bills have been ripping higher. The yield on the 3-month Treasury bill, for example, stood at 3.99% Thursday, the highest since 2007. The 1-month Treasury bill was yielding about 3.14% Thursday, while the 6-month bill was yielding 4.45%. To put that in perspective, the 30-year Treasury bond was yielding 4.16% Thursday. Bond yields move opposite to price, so if investors buy a bond or bill, and interest rates rise, they could lose principal.
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