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2-year Treasury yield falls below 4.5% as traders assess potential slowdown in Fed hikes

The 10-year Treasury yield hit a new 14-year high on Friday morning, but bonds pared losses after a report that some Federal Reserve officials feared excessive tightening with rate hikes.

The yield on the Cash 2 years fell more than 12 basis points to 4.481%. Short rates are more sensitive to Fed rate hikes.

The 10-year cash flow the yield, which hit 4.337% at one point during the session, fell less than a basis point to 4.219%. The 30-year Treasury yield, which is key for mortgage rates, jumped 12 basis points to 4.335%.

Yields and prices have an inverse relationship. One basis point equals 0.01%.

The Wall Street Journal reported Friday morning that some Fed officials were worried about the current pace of rate hikes and were beginning to worry about the risks of too much tightening. Market expectations for a 0.75 percentage point rise in December fell after the report, although a rise of that magnitude in November is widely seen as locked in.

Market worries about a recession have deepened in recent weeks as data reflect signs of economic contraction as the Federal Reserve continues to strike a hawkish tone.

San Francisco Fed President Mary Daly said Friday she would like to see a “reduction” in rate hikes, but said she needed a more noticeable drop in inflation.

“My own view is that it should at least be something we’re looking at at this point. But the data hasn’t cooperated,” Daly said to laughter from the audience. “If only I could get the data to do what I want it to do, but it hasn’t cooperated.”

Mark Cabana, head of US rates strategy at Bank of America, said on “Power Lunch” that the data may not cooperate for some time.

“It’s hard for us to imagine a Fed that feels good about reducing the pace of rate hikes when its monetary policy mandate is so lopsided. Inflation is still a problem and the labor market is still going strong,” Cabana said.

— CNBC’s Jeff Cox contributed to this report.


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