Market sentiment continued to swing sharply last week away from expecting that the Federal Reserve would raise rates at a Nov. 16 meeting. Along with an October employment report that many, but not all, analysts saw as lowering the probability of a rate hike, the swing in sentiment produced a good bond rally for the week, extending the gains of late October. Yields on 10-year Treasury notes and 30-year bonds fell about 10 basis points. Meanwhile, the stock market staged an strong upward march. But the labor market did get tighter in October, even though wage gains were very limited, and some analysts still expect the Fed to move rates up by a quarter-percentage point.
The Treasury has a busy auction schedule this week. Tomorrow it will sell $10 billion in three-month bills and $8 billion in six-month bills, followed Tuesday by $10 billion in one-year bills and $15 billion in five-year notes, and on Wednesday by $10 billion in 10-year notes. In when-issued trading Friday, the bills yielded 5.13 percent, 5.33 percent and 5.44 percent, respectively, while the notes yielded 5.83 percent and 5.94 percent.