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Monday, March 20, 2023

U.S Treasury Yields Surge Past Key Level to 1.64%, Highest in a Year

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Treasuries tumbled anew Friday, sending 10- and 30-year yields to their highest since early 2020, amid growing concern stimulus will fuel an explosion in economic growth that ignites price pressures.

Expectations for inflation over the next decade lurched to a seven-year high.

Yields on the 10-year benchmark rose as much as 10 basis points to reach 1.64 percent in U.S. morning trading, a level unseen since February 2020.

The 30-year rate advanced almost 11 basis points to a session high of 2.40 percent, edging toward a January 2020 peak.

Rates leaped across notes and bonds, with the biggest moves in the long end, steepening the yield curve. The 10-year rate has failed to close above 1.60 percent since early 2020, though it has surpassed that level in volatile intraday trading several times in recent weeks.

The breakeven rate on 10-year notes, a measure of market expectations for annual consumer-price gains based on the yield gap to inflation-linked debt, topped 2.30 percent in early New York trading Friday, a level it hasn’t breached since early 2014. An equivalent measure for the five-year note touched its strongest level since 2008.

With Friday’s sudden spike, Treasury yields across the long end exceeded levels seen after the disastrous seven-year U.S. bond auction from Feb. 25. Markets had been looking for a period of calm after the relatively uneventful passage of this week’s debt auctions, with focus switching to the Federal Reserve’s March 17 policy decision.

The Federal Open Market Committee’s meeting next week is set to be the next major focus point for traders.

In comments last week, Fed Chairman Jerome Powell did note the recent shift up in bond yields, but said little to indicate that officials are willing to push back against it at this stage.

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