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US Treasury yields jump to multi-year highs as Fed tightening bets rise
The 10-year yield climbed to 5.148% for the first time since 2007 after a sharp move higher, while a weak five-year auction added to investor unease.
US Treasury yields extended their surge to multi-year highs as expectations grew that the Federal Reserve may need to keep tightening policy, with risk sentiment deteriorating and the US dollar gaining support, according to FXStreet.
The outlet said the 30-year yield traded at 5.444% on Thursday, the highest in 22 years, and the benchmark 10-year reached 5.148%, its first level since 2007, after a 20-basis-point jump from Wednesday’s lows. It also noted the 2-year yield rose to 4.494%, a level tied closely to shifting expectations for Fed action.
FXStreet linked the move to upbeat US business activity from preliminary S&P Global Purchasing Managers’ Index data, plus higher wages and rising costs amid high energy prices. Fed Governor Michael Barr said further rate hikes are likely needed to support a timely return to 2% inflation, the outlet added.
The jump also followed what the outlet described as poor demand at a five-year Treasury auction, which MUFG said points to investor unease about the rates outlook. MUFG further warned that foreign exchange “carry” trades could be more vulnerable in a shakeout, expecting high-yield exposure across emerging markets to suffer most while the yen and Swiss franc outperform.