U.S. Treasury yields rose Monday and the benchmark 10-year climbed to its highest level since November 2018 amid concerns of surging inflation pressures and slowing economic growth.
The yield on the 10-year Treasury note punched above 3.17% but was last down 9 basis points to 3.034%. The yield on the 30-year Treasury bond fell 7 basis points to 3.152%. Yields move inversely to prices, and 1 basis point is equal to 0.01%.
The 10-year rate broke above 3% mark at the beginning of last week after the Fed announced its latest monetary policy move.
The Fed hiked rates by 50 basis points, but the central bank’s efforts to combat rising inflation with more aggressive rate raises has also sparked concerns that this could potentially drag on economic growth.
“To start the year, we knew that central bank tightening would make for a challenging market,” wrote Tom Essaye of The Sevens Report. “But that has been compounded by two surprise events: The Russia/Ukraine war (no one expected that in January) and Chinese lock-downs (it’s quasi-shocking the Chinese are still adopting these policies and crushing their economy).”
“Again, this all matters because of economic growth,” he added.
Bank of America on Monday revised its year-end targets for the 2-year and 10-year notes to 3.5% and 3.25%, respectively, noting that it expects yields to fall in 2023 as signs of an economic slowdown loom.
“Our forecasts now call for 2Y USTs above the forwards but 10Y in-line to below the forwards,” wrote Mark Cabana. “Our logic is that the Fed will need to get tough on inflation & hike rates to a place where they are restrictive by late ’22 or early ’23. This will further downside growth & recession risks.”
— CNBC’s Jesse Pound contributed to this market report.