US treasury bond yields increase on expectation of more interest rate hikes by US Federal Reserve

17 Feb 2023 , 08:40 AM

In response to a string of strong economic data coming out of the United States, which increased market expectations that additional interest rate hikes were imminent,  U.S. Treasury yields increased on Friday. The dollar also looked to post gains for a third straight week.

According to data released on Thursday, the number of Americans submitting new applications for unemployment benefits surprisingly decreased last week. In contrast, other data showed that in January, producer prices rose on a monthly basis at their fastest rate in seven months.

The most recent data releases helped the U.S. dollar gain ground, pushing the British pound to a new six-week low of $1.1957 on Friday. The euro also suffered, falling 0.15% to $1.0657.

The New Zealand and Australian dollars were also stuck close to the six-week lows they experienced in the previous session.

The Australian dollar last moved down by 0.29% to $0.68595 after hitting a low of $0.68405 on Thursday. The kiwi dropped by 0.27% to $0.62385 in the most recent session after reaching its lowest point since January 6.

The reports released on Thursday came in the wake of information released earlier this week that showed strong growth in January retail sales in the United States and indications of sticky inflation, igniting concerns that the Federal Reserve would have to raise rates more than initially anticipated.

More hawkish rate repricing has also driven up U.S. Treasury rates, with the two-year yields recently at 4.6549%.

The benchmark 10-year U.S. Treasury yield reached its highest level since December 30 on Friday, peaking at 3.878%.

Two policymakers from the Fed said on Thursday that the Fed likely should have raised interest rates more than it did earlier this month as a further indication that the U.S. central bank still has room to raise rates.

The U.S. dollar index was last 0.09% higher against a basket of currencies at 104.20 after reaching a more than one-month high of 104.24 the previous session. It was also on track to post a third consecutive weekly gain.

The dollar was aiming for its biggest week since last October, a weekly rise of more than 2% against the yen.

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