U.S. Treasury yields were on the rise again on Friday, weighing on sentiment in some corners of U.S. and European equity markets amid worries a strong economic recovery could push the Federal Reserve to lift interest rates earlier than it has signaled.
What are Treasurys doing?
The 10-year Treasury note yield TMUBMUSD10Y, 1.598% surged 6.8 basis points to 1.595%, while the 2-year note rate TMUBMUSD02Y, 0.157% edged 1.2 basis points higher to 0.155%. The 30-year bond yield TMUBMUSD30Y, 2.345% climbed 7.2 basis points to 2.353%. Bond prices move inversely to yields.
What’s driving Treasurys?
Investors said there wasn’t a clear trigger for the sudden bearish momentum in Friday’s overnight trading that sent the 10-year Treasury note back above 1.60% again, but suggested some of the older drivers of higher yields may be reasserting themselves.
See: Here’s how far the Nasdaq could fall if bond yields reach 2%
In particular the Biden administration’s $1.9 trillion fiscal relief package is expected to support the economy through the pandemic, giving aid to households, small businesses and local governments but may also create inflation.
See also: Biden stimulus will give a major boost to the global recovery, OECD says
So far, the Fed has indicated it will keep policy accommodative for as long as possible, however, investors fret a strong economic rebound and recovery in inflation could force the Federal Reserve into action earlier than it would have intended.
In U.S. economic data, February producer prices were forecast to rise 0.5% in data due at 8.30 a.m. ET. Meanwhile, the University of Michigan’s consumer sentiment index is expected to rise to 78.9 in March, from the previous month’s 76.8.
What did market participants say?
“The main reason cited for the selling has been the passage of the U.S. stimulus bill being followed up by a $4 trillion infrastructure bill sometime in the next
few months,” wrote Tom di Galoma, managing director of Treasurys trading at Seaport Global Securities.
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