US Treasury yields surged to more than three-year highs on Monday after comments from a European Central Bank official added to expectations that central banks globally will reduce stimulus as the economic outlook improves. A break of technical support levels added to bearish sentiment with benchmark 10-year yields rising above the trendline that has marked a more than 30-year bull run dating back to the 1980s.
"Key levels were taken out, the trend is broken," said Tom di Galoma, a managing director at Seaport Global Holdings in New York. "It's probably a realization that the global economy is moving ahead and has quite a bit of steam." Ten-year note yields reached a peak of 2.727 percent, the highest since April 2014. The notes were last down 11/32 in price to yield 2.701 percent.
Central banks are removing support for bond markets as the economic outlook brightens. "Overall the theme is we've had an uptick in growth around the globe," said Michael Cloherty, head of US rates strategy at RBC Capital Markets in New York. Dutch central bank president Klaas Knot, who is also a member of the ECB governing council, said on Sunday that "there is no reason whatsoever" for the ECB to continue its asset purchase program.
Some economists expect the Federal Reserve to raise its economic assessment when it concludes its two-day meeting on Wednesday. That could increase the probability that the US central bank raises interest rates four times this year. Interest rates futures are currently pricing in three or less rate hikes this year, according to the CME Group's FedWatch Tool.
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