April 21, 2021

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US 10-year Treasury yield hits highest level since last January

2 min read

A key measure of US long-term borrowing costs has hit its highest level since the early days of the coronavirus crisis as traders sold Treasuries at the end of a brutal quarter for global government bonds.

The 10-year Treasury yield rose as much as 0.05 percentage points from Monday’s closing level to just above 1.76 per cent, the highest point since January 2020, according to Bloomberg data.

The fresh bout of selling came as investors weighed continued optimism over the US’s vaccine rollout and another plan to boost fiscal stimulus.

US bond markets have led a global retreat in government debt since January as investors fret that the Federal Reserve will allow the economy to run hot, with massive amounts of government spending combining with monetary stimulus to pump up inflation.

A broad Bloomberg Barclays index of debt issued by developed market governments around the world has fallen 5 per cent since the start of the year on a total return basis, snapping four-straight quarters of rises.

President Joe Biden on Monday promised that by mid-April 90 per cent of US adults would be eligible for the Covid-19 vaccine and would have access to a vaccination site within 5 miles of their homes. On Wednesday, the president will travel to Pittsburgh, Pennsylvania to lay out plans for a $3tn infrastructure package, which comes after this month’s $1.9tn fiscal stimulus bill.

Rupert Thompson, chief investment officer at wealth manager Kingswood, said the “massive” scale of stimulus in the US and globally has caused “considerable nervousness over inflation and has been behind the recent sell-off in government bonds”.

The US five-year note, which has suffered less selling than longer maturities this year, was hard hit in Tuesday’s move. The 5-year yield touched its highest level since March 2020 at 0.94 per cent, having risen 0.08 percentage points since the week began.

European government debt also came under pressure on Monday with German 10-year Bund yields reaching their highest level in more than a week at minus 0.29 per cent. UK 10-year gilt yields stood at 0.83 per cent, up from 0.74 per cent at the start of the week.

“Bond markets are returning to pricing the economic recovery,” ING analysts wrote.

Sharp moves in bong trading earlier this year have rattled equity markets, although trading in Wall Street futures was tame in European dealings. Futures for the tech-heavy Nasdaq pointed 0.3 per cent lower, while contracts for the blue-chip S&P 500 were 0.9 per cent higher.

2021-03-30 04:04:44

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