Yahoo Finance 10-year Treasury yield surges to highest level since early 2014
The 10-year Treasury yield hit its highest level since January 2014, nearing the critical 3pc milestone, on signs the US Federal Reserve looks set to hike interest rates at least two more times this year.
The yield on the 10-year Treasuries – the benchmark borrowing cost for international finance – hit 2.96pc, up 5 basis points, on Friday evening.
Higher inflation tends to depress bond prices, lifting yields in the process. Last week, data showed US inflation had risen at the quickest pace in a year in March, and inflation could be set to push higher on rocketing commodity prices, with the price of metals such as nickel and aluminium climbing.
Bond prices also move in an opposite direction to interest rates and the surge on Friday came on the back of comments by Fed governor Lael Bainard that the central bank could be looking to tighten monetary policy.
"The outlook looks consistent to me for continued gradual increases in the federal funds rate. My anticipation is that the outlook is for continued, solid growth."
Jerome Powell, who took over as Fed chairman in February, has signalled the Fed could hike rates faster than previously expected as the US economy strengthens.
Tower Bridge Advisors' Maris Ogg said: "We are in a different environment and the market is still wrestling with how all that is going to come out.
"The market is wrestling with how high rates are going to go and how damaging it is going to be."
Some analysts also suggested the recent selloff in bonds could be partly down to US President Donald Trump's plans for American companies to repatriate overseas cash piles. This could reduce the amount of money those companies hold in the form of Treasuries.
Lou Brien, market strategist at DRW Trading in Chicago, said: "I think it has to do with funding issues, a reallocation based on repatriation of dollars.
"I don't think bonds are reacting to stocks, I don't think they're reacting to heightened inflation expectations."
