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The fixed income market observed a relatively mixed session, primarily characterized by slight upward pressure on UST yields in the long end, while the short end showed minor fluctuations following a recent surge. The UST 10Y yield continued to consolidate its position near the multi-week highs reached last week, closing November 3 at approximately 4.11%, a minor daily increase of around 3.4bp, reflecting cautious market sentiment. This sustained level near 4.1% is a direct consequence of the Federal Reserve’s recent cautious tone regarding future rate cuts and resilient, albeit mixed, economic data, which have dampened expectations for aggressive near-term monetary easing.

The longer end of the curve, notably the 30-year bond, exhibited a more pronounced rise, climbing 2.0bp to 4.689% on November 3, marking its fourth consecutive day of yield increases, suggesting increasing concern about long-term fiscal deficits and persistent supply pressures, thereby pushing term premiums higher. Conversely, the short-term 2Y yield saw a slight decline of approximately -1.0bp on the previous trading day (November 2), settling around 3.60%, demonstrating that while the market is still pricing in the hawkish Fed tilt, the extremely short end of the curve is finding minor support amid softer manufacturing data reported earlier in the week.

The overall outlook remains one of heightened sensitivity to incoming economic releases, particularly labor market and inflation data, which will heavily influence the path of UST yields. The modest bear-flattening witnessed recently, where short-term yields rose faster than long-term yields, has paused, but the overall yield curve is pressured by a persistent policy-rate-at-peak narrative, keeping the bias for shorter-duration instruments slightly more defensive. Corporate credit markets remained stable, with Investment Grade spreads holding near tight levels, benefitting from the search for yield despite the overall volatility in sovereign bonds. The market is positioned neutrally, anticipating clarity from the next batch of high-impact macroeconomic indicators.