10-year Treasury yield jumps to highest level in more than a year
The 10-year Treasury yield shot to the highest level in over a year on Friday, a sign of optimism in an economic comeback but also a reflection of heightened inflation fears after the enactment of the $1.9 trillion stimulus package.
The yield on the benchmark 10-year Treasury note advanced 10 basis points to 1.626% at around 4:00 p.m. ET and briefly reached 1.642%, its highest level since February 2020. The yield on the 30-year Treasury bond rose 10 basis points to 2.388%. Yields move inversely to prices and 1 basis point equals 0.01%.
Dollar rises with Treasury yields as economic prospects rise
The dollar rose on Friday following a fresh spike in Treasury yields as the prospect of economies emerging from year-long coronavirus lockdowns reignited inflation fears.
Market participants have grown wary in recent weeks that massive fiscal stimulus and pent-up consumer demand could lead to a jump in inflation as expanding vaccination campaigns bring an end to lockdowns.
Data on Friday showed U.S. producer prices (PPI) had their largest annual gain in nearly 2-1/2 years, though considerable slack in the labor market could make it harder for businesses to pass the higher costs on to consumers.
The U.S. economy is set to get a massive shot in the arm after President Joe Biden signed a $1.9 trillion stimulus bill into law on Thursday and urged U.S. states to make all adults eligible for a coronavirus vaccine by May 1.
A selloff in Treasuries overnight continued into the U.S. session, with the yield on the benchmark 10-year note hitting a fresh one-year high of 1.6420%, helped by optimism around U.S. economic prospects.
The dollar was up 0.25% at 91.668 against a basket of six major currencies, leaving it on track to end the week slightly lower.
The greenback hit an intraday high of 92.506 when yields surged on Tuesday, which was its strongest since November, but recorded three straight days of losses as yields stabilized.
The European Central Bank said on Thursday that it would increase the pace of its money printing to prevent a rise in euro zone bond yields in support of the economic recovery.
Although the euro was down 0.3% at $1.19505, it was set for a small weekly gain.
Traders will be looking to the U.S. Federal Reserve’s policy meeting next week for any comments about rising yields.
Dollar-yen was up around 0.52%, changing hands at 109.050 , close to the 109.235 reached on Tuesday, which had been the yen’s weakest since June 2020.
Reference: CNBC, Trading View
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