10-year Treasury nears one-year high of 1.40% as bond selloff gathers steam

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These are the last days of small government and the Biden administration will make sure of that


U.S. Treasury yields rose sharply Monday morning, kicking off the week as a selloff in bonds appeared to spill over into more pessimism into broader risk assets.

What are Treasurys doing?

The 10-year Treasury note yield
TMUBMUSD10Y,
1.352%

rose 3 basis points to 1.375%, its highest in around a year, while the 2-year note rate
TMUBMUSD02Y,
0.112%

was flat at 0.109%. The 30-year bond yield
TMUBMUSD30Y,
2.178%

gained 2.3 basis points to 2.163%.

Bond yields rise as prices fall.

What’s driving Treasurys?

A lurge higher in government bond yields was seen sending U.S. stock benchmarks reeling to start the week’s trading, with European and Asian equities also headed lower, amid concerns that higher interest rates could point to tighter lending and higher borrowing costs across the globe.

Rapidly rising yields risk reversing the loose financial conditions, which have buoyed risk assets, that central banks implemented to help combat the economic harm from the COVID pandemic.

Fears around reflation come as rollouts of COVID-19 vaccines pick up steam. President Joe Biden on Friday secured a commitment from Pfizer
PFE,
-0.45%

to double its COVID-19 vaccine allocation. Pfizer currently provides five million doses a week to the U.S. government.

Expectations that the U.S. will return to economic normality, in turn, has dragged forward investor forecasts for the Federal Reserve to raise its benchmark interest rate, earlier than policy makers have been predicting, as projected by the central bank’s so-called “dot plot” chart.

In a sparse economic calendar, traders may watch the Conference Board’s leading economic indicators index for January due at 10 a.m. Eastern.

What did market participants say?

“The repricing in Treasuries is rational. The steepening of the yield curve makes sense. Our contention has been and remains: improvement in the economy,” said Gregory Faranello, head of U.S. rates at AmeriVet Securities.

“The challenge for [risky assets]: we’ve pulled a great deal forward and overall levels and valuations look stretched,” said Faranello.



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