TOKYO: US Treasuries extended their rout on Thursday, with the 10-year yield hitting a fresh 4 1/2 month high, as the Federal Reserve's brighter economic outlook and recent stock market strength drove investors out of US debt.
The yield on 10-year Treasury notes rose to 2.33 percent at one point, its highest since late October, edging closer to Oct. 28 high of 2.42 percent.
The yield has risen about 30 basis points in the past three days, after having been stuck in a rough, 30-basis point range between 1.80 and 2.1 percent in the preceding three months.
Treasury yields have risen on better economic data and improved sentiment, the Fed's slight upgrade in its economic assessment and the mostly positive results from stress tests of the banking sector.
The 10-year yield has broken above key technical level of 200-day moving average, at 2.25 percent on Thursday, for the first time since July.
"Investors sentiment has completely changed. In the past, people were expecting growth of around 1.5 percent but now they say growth could top three percent," said Hiroshi Yokotani, director of fixed income at Alliance Bernstein.
"That will be above US potential growth rate and will have an inflationary effect, ruling out the chance of QE3 in the near future," he said, adding that he now sees the 10-year yield moving at least above 2.5 percent.
The shortest end of the yield curve is also coming under heavy pressure, with the two-year yield rising to as high 0.41 percent, a high not seen since July.
Money market futures are pricing in a rate hike by the middle of next year, though market players caution that price moves are more likely to be a knee-jerk reaction to rising short-term note yields than reflection on change in market expectations about the Fed's policy.
Comments
Comments are closed.