The benchmark 10-year Treasury yield fell one basis point to 4.132%, while the 30-year yield gained one basis point to hover at 4.801%.
- Experts at ING Think stated in a recent note that they expect the Q4 GDP growth to be “considerably slower.”
- The firm also expects a slowdown in consumer spending during the quarter.
- Analysts say a mix of tepid fourth-quarter growth forecasts and deeper structural market forces is keeping long-term yields from collapsing.
U.S. Treasury Yields were muted on Friday morning as investors returned to the markets in a holiday-shortened week, even as analysts expect muted growth in the fourth quarter.
The benchmark 10-Year Treasury yield fell one basis point to 4.132%, while the 30-year yield gained one basis point to 4.801%. The 2-year Treasury yield declined two basis points to hover at 3.493% at the time of writing.
Analysts say a mix of tepid fourth-quarter (Q4) growth forecasts and deeper structural market forces is keeping long-term yields from collapsing, reflecting macroeconomic caution and persistent term-premium pressures.
“You can’t have inflation and growth running at this pace and expect 10-year yields to move much lower,” said Gregory Faranello, head of U.S. rates strategy at AmeriVet Securities, according to a report by CNBC.
Growth Slowdown Likely
Analysts at ING Think stated in a recent note that they expect the Q4 Gross Domestic Product (GDP) growth to be “considerably slower,” following the third-quarter (Q3) GDP surprise.
The firm tempered its expectations for Q4 GDP due to the 43-day-long U.S. government shutdown, and expects a slowdown in consumer spending as well during the quarter.
“Expectations of cooling data probably explains the relatively muted market reaction with the 10Y Treasury yield only up 3bp on the day [of GDP report release] and Fed funds rate cut expectations for 2026 still holding above 50bp,” the firm said.
Rate Cut Outlook
Jeremy Siegel, professor emeritus of finance at the University of Pennsylvania’s Wharton School of Business, on Tuesday stated that he expects cooling inflation to give the Federal Reserve more room to lower the policy rate further. He expects additional easing that will take rates closer to the low-3% range.
According to data from the CME FedWatch tool, the probability of a 25-basis-point rate cut in January is now at 17.7%, down from 22.1% a week ago.
However, Siegel still does not see a collapse in longer yields even if the policy rate is lowered. “I do not expect that to automatically pull the 10-year down by the same magnitude. The long end is likely to remain anchored in the low-4% area as term premium, issuance, and structural forces keep longer yields from collapsing,” he said.
Entry Points To Become Attractive
Analysts at Nuveen stated in their latest note that the entry points for Treasuries will become attractive going forward.
“Risk premiums may widen further, with entry points likely to become more attractive over the coming quarters. Duration is likely to reassume its role as a growth hedge,” the firm said.
It added that current yields present compelling opportunities for investors, while noting material downside risks to the U.S. economy. The firm said that tariffs are likely to compress consumer spending and weigh on business fixed investment, but it still does not have a recession as its base case.
Key Data
While the earnings season is drawing to a close, investors will keep an eye on the Federal Open Market Committee’s (FOMC) minutes from the December meeting, scheduled to be released on Tuesday.
Home sales data on Monday, and the S&P Case-Shiller home price index on Tuesday will also be on investors’ radars next week.
The weekly jobless claims report from the U.S. Department of Labor will also be keenly monitored.
The iShares 20+ Year Treasury Bond ETF (TLT) was up 0.15% at the time of writing, while the iShares 7-10 Year Treasury Bond ETF (IEF) was up 0.16%. Retail sentiment around the TLT ETF was in the ‘bullish’ territory.
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