10-year Treasury yield surges above 3.20% as sell-off continues

A sell-off in US Treasuries continued on Monday, briefly pushing the 10-year yield above 3.2% as investors waited for another round of inflation data this week.

What are returns doing?
  • The yield of the 10-year Treasury note TMUBMUSD10Y,
    was up 3.188% according to FactSet after trading above 3.20% from a session high. The yield as of 3:00 p.m. ET on Friday was 3.124%, the highest since November 3, 2018. Yields and debt prices are moving in opposite directions.

  • The 2-year Treasury yield TMUBMUSD02Y,
    was 2.709%, up from 2.696% on Friday afternoon.

  • The yield of 30-year government bonds TMUBMUSD30Y,
    rose to 3.292% from 3.22% late Friday.

What moves the market?

A sell-off in Treasuries has pushed yields sharply higher in 2022 as investors reacted to inflation, which was at its hottest in more than four decades, and the Federal Reserve stepped up efforts to ease price pressures. The Fed raised interest rates by 50 basis points, or half a percentage point, last week. It’s the biggest since 2000. The Fed also signaled that two more half-point hikes were on the table for upcoming meetings.

Stock index futures pointed to sharp losses for US stocks. A sharp rise in yields is negative for stocks, particularly technology and other growth stocks whose valuations are based on long-term earnings and cash flows. Rising yields on risk-free government bonds are undercutting the present value of these future flows.

The focus this week is on inflation data and any signs of slowing price pressures, with the April CPI due on Wednesday morning.

What do analysts say?

“Bond yields have continued to rise despite the fact that riskier assets like stocks have been on the downturn. Some time ago we might have expected that weakness in risky assets would lower government bond yields, but rising inflation has clearly destroyed that relationship, at least for now,” said Steve Barrow, head of G-10 strategy at Standard Bank, in a message.

“The bottom line, in our view, is that bond prices and stock values ​​have risen together for many years and are now falling together and are expected to do so for some time,” he wrote. 10-year Treasury yield surges above 3.20% as sell-off continues

Brian Lowry

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