U.S. stocks swung higher and yields on 10-year Treasuries fell below 2.7 percent Thursday as investors bet a Federal Reserve interest rate hike this month would be priced into bond markets.
The Dow Jones Industrial Average and the S&P 500 Index briefly erased earlier gains on Wall Street as the yield on 10-year notes fell as low as 2.68 percent, its lowest in two weeks. Two-year Treasury yields were little changed at 2.564 percent, holding below their highest levels since 2015.
Treasury yields are likely to remain close to current levels as investors digest a Fed policy decision next week and dig through economic data in coming weeks, said David Kelly, chief global strategist at JPMorgan Asset Management. As long as the Fed continues to remain “dovish,” he added, stocks “are probably not going to move very much.”
Moody’s Investors Service on Wednesday cut its rating on Greece’s sovereign debt, citing concerns that Greek banks are using the stock of government bonds guaranteed by the International Monetary Fund to boost their capital. The rating was slashed one notch from B1 to B2. It was Moody’s lowest rating since 2015.
Bond traders pared bets on an interest-rate increase next week as global equities pulled back from a two-year high on demand concerns, erasing about half of the gains they saw a day earlier. Investors await the outcome of a meeting of Group of Seven leaders in Canada amid warnings the escalating trade tensions between the U.S. and other top economies pose a global risk to growth.
Among stocks, General Electric Co. was up after billionaire investor Carl Icahn disclosed a stake. Dollar Tree Inc. sank after lowering its earnings forecast.
The yield on U.S. 10-year Treasuries declined the most in a week as investors weigh policy action against the possibility of a rate increase at the Federal Reserve’s June meeting. The Federal Open Market Committee is widely expected to hold interest rates steady, with yields remaining close to their lowest levels of the year.
The yield on 10-year notes was little changed at 2.688 percent at 2:46 p.m. in New York after the dip below 2.7 percent. Futures traders are pricing in a 97 percent probability of a June rate increase, down from 95 percent a day earlier. The odds of a June 25 increase currently stand at 80 percent.