The U.S. dollar was up hard today, October 6. The Invesco DB U.S. Dollar Bullish Fund ETF (UUP) rose 1.00%. The Dollar Spot Index (DXY) gained 0.90%
And Treasury yields resumed the upward move that has erased much of the gain in bond prices of the last week.
The yield on the 10-year Treasury climbed 7 basis points today to 3.82%. On Monday, October 3, the yield was just 3.64%, having tumbled 18 basis points that day.
Today the yield on the 5-year Treasury once again moved above 4% to 4.07%. The yield on the 2 -year Treasury, very sensitive to interest rate moves from the Federal Reserve, spiked to 4.25%. On October 3 the 5-year yield tumbled below 4% to 3.87% and the yield on the 2-year Treasury had retreated to 4.09%.
A stronger dollar and higher Treasury yields would indicate that the market sees the Federal Reserve continuing to raise interest rates. And a belief that the September jobs report tomorrow will show enough job growth to keep the Fed on track to another 75 basis point increase at its next meeting on November 2.
The CME FedWatch Tool puts the odds of a 75 basis point increase in the Fed’s benchmark interest rate at the November 2 meeting at 73.1% today. That’s up from 53.2% odds a week ago. The Tool puts the odds of a 50 basis point increase at just 26.9%, down from 46.8% a week ago. There’s no market sentiment favoring an increase of just 25 basis points.
