The 10-year Treasury yield is up by about four basis points after the Bureau of Economic Analysis released its advance estimate of second-quarter GDP, showing a 3.0% annualized growth rate. That came on top of the consensus estimate of 2.6% and marks a comeback from the first quarter’s decline of 0.5%.
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Bond prices carry an inverse relationship with their yield. With the yield on the 10-year rising, that signals that investors are selling bonds in light of better-than-expected economic data. Bonds are viewed as a safe-haven asset. With better economic data, investors are incentivized to take on greater risk.
Fed Expected to Hold Rates Steady
The Fed is set to make its interest rate decision at 2 p.m. Eastern Time today and will likely leave rates unchanged. While the federal funds rate and the 10-year Treasury yield do not have a direct relationship, yields can still be affected by the Fed’s decisions and comments.
For example, the Fed often cuts rates to support a weak economy. That could lead investors to expect weaker economic growth and lower inflation, incentivizing bond purchases and pushing yields lower. A rate hike has the opposite effect.
Track the 10-year Treasury yield with TipRanks’ Economic Indicators Dashboard.
