US 10-year Treasury yield briefly exceeds 5%
In the United States, the yield on 10-year government bonds briefly exceeded 5% on Monday, reaching 5.011%. This was the highest intraday level since July 19, 2007, when the figure stood at 5.069%, MarketWatch reports, citing Dow Jones Market Data.
Government bond sell-off
The rise in yields comes amid a continuing sell-off in the US Treasury market, which is estimated at $31.5 trillion. Bond prices and their yields move in opposite directions.
Wellington fixed-income portfolio manager Brij Khurana called the 5% level psychologically important. According to him, a further sell-off could increase borrowing costs for households, businesses, AI hyperscalers, and the US federal government. The US federal budget deficit was recently estimated at nearly $2 trillion.
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Expectations for the Fed rate
The yield on two-year Treasury bonds, which is sensitive to monetary policy, rose to 4.66% on Monday. This is above the upper bound of the Federal Reserve's target rate range of 3.75% and, according to MarketWatch, indicates that traders expect at least one rate hike by the end of the year.
Khurana believes that the Fed may lose control over yields on long-term 10- and 30-year securities if it does not raise rates at its meeting on Wednesday. He supported a precautionary rate hike, citing nervous behavior in the bond market.
US inflation, according to the report, remains above 3%, compared with the Fed's 2% target. At the same time, oil prices were rising amid an escalation of the conflict surrounding Iran: global oil prices approached $109 per barrel. The ICE US Dollar Index gained 0.5% against a basket of other currencies that day.
