US Treasury Yields Spike to Four-Week Highs, Reflecting Concerns About Inflation and Growth
US Treasury yields have surged to four-week highs, with the two-year/10-year yield curve narrowing its inversion to the smallest gap in two weeks. This increase in yields reflects growing worries about higher inflation and stronger economic growth.
The benchmark US 10-year yields settled at 4.623% on Wednesday, marking a significant jump from 4.471% at the end of the previous week. In just two weeks, the 10-year US yield has risen by 30 basis points. Additionally, US two-year to 30-year yields have reached their highest levels since early May.
The spike in US Treasury yields has been driven by rising uncertainty surrounding potential interest rate cuts by the US Federal Reserve, especially in light of positive economic data. This surge in yields has also had a ripple effect on global risky assets, leading to sharp declines in the US stock market and similar movements in Asian and Indian equity markets.
Key factors contributing to the rise in US Treasury yields include a weak debt auction, concerns about future demand for government debt, and worries about potential rate cuts by the Federal Reserve. The recent sale of $44 billion in US seven-year debt resulted in a high yield of 4.65%, indicating that investors were seeking a premium to purchase the note.
Furthermore, comments from Minneapolis Federal Reserve Bank President Neel Kashkari have added to concerns about the timing of rate cuts, as he emphasized the need for significant progress on inflation before considering easing monetary policy. The latest Beige Book survey from the Federal Reserve also highlighted modest economic expansion but growing pessimism among firms about the future.
Investors are now closely watching for the release of the US Core Personal Consumption Expenditures (PCE) price index report and the May labor report for further insights into the Federal Reserve’s next policy move. The recent uptick in US Treasury yields underscores the ongoing uncertainty in the financial markets and the potential impact on global economic conditions.
