After hitting multi-year highs to start the new week, we are seeing bond yields pull back on the day.
Treasury yields are paring back some of the advance from yesterday with 10-year yields now down 5 bps to 2.09%. 2-year yields are down 4 bps to hold just above 1.80%.
In the context of this week, 10-year yields are still seeking a breakout above the 2% mark.
Meanwhile in Europe, 10-year German bund yields are off also nearly 5 bps to near 0.32%.
There isn't much of a change in key trading drivers at the moment, with the Russia-Ukraine situation also keeping as it is over the past few days. If anything else, this hints at elevated volatility in bonds ahead of the Fed tomorrow.
Powell & co. will have a lot of communicating to do right from the get go, in deciding whether to hike by 25 bps or 50 bps. The former appears to be the consensus view and what markets have priced in, considering that the Fed also boxed itself into it more or less.
But that doesn't rule out more aggressive pricing to follow in the months ahead, where the Fed could go with a 50 bps rate hike in May or June. Depending on the communication, that could really get the bond market a bit jumpy.
