US 10-year yields hit 4-year high, as safe-haven trade fades

NEW YORK: US Treasury yields rose on Monday, with benchmark 10-year yields hitting a four-year high and those on 30-year bonds climbing to an 11-month peak, as a stock rally and improving risk appetite diminished the safe-haven appeal of government debt.

US 10-year yields, which move inversely to prices, have risen in three of the last five sessions. Since a 10-month low hit in September, 10-year yields have risen nearly 90 basis points. The yields' outperformance overall, though, was being led by US 7-year and 5-year notes.

"With the equity market doing better today, there was some confidence that the volatility that characterized last week would not continue," said Tom Simons, money market economist, at Jefferies in New York.

"So perhaps there's a little less need for that safe-haven trade," he added.

Analysts also said yields have also been boosted by strong US economic growth prospects and global central banks normalizing years of easy monetary policy.

"Yields have been rising because US fundamentals are solid and also because we're seeing a global normalization of monetary policy that have driven term premiums higher," said Bruno Braizinha, interest rates strategist at Societe Generale in New York.

The US equity market, however, has been flustered by the rise in yields, on concerns it could trigger a surge in borrowing costs for US corporations and households that could hamper economic growth.

On Monday, Wall Street was trading higher, and Braizinha said one reason could be that equity investors believe the current range in the US 10-year note yield of between 2.80-2.90 percent would hold for now.

In late trading, US 10-year yields were up at 2.851 percent, from 2.831 percent late on Friday. Earlier in the session, 10-year yields hit 2.902 percent, the highest since January 2014.

US 30-year bond yields rose to 3.145 percent, from Friday's 3.139 percent. The yield on this maturity touched an 11-month peak of 3.139 percent earlier in the session.

Analysts also said concerns about US budget deficit spending weighed on Treasury prices.

President Donald Trump on Monday unveiled his second budget, which calls for cuts in domestic programs and seeks a sharp increase in military spending and funding for a wall on the Mexican border.

Investors are also bracing for US inflation data this week, which should shed more light on whether the recent run-up in yields is justified.

"There have been a number of good reasons to believe that inflation pressures are increasing," said Jefferies' Simons.