U.S. 10-year Treasury yields hits 5% for first time since 2007
LONDON (Reuters) — The U.S. 10-year Treasury yield briefly reached 5% for the first time since 2007, marking a fresh milestone in a relentless push higher for government borrowing costs.
Further signs of resilience in the U.S. economy help explain the latest sell off in Treasuries, as traders have unwound bets the U.S. Federal Reserve would soon start to lower interest rates.
Earlier on Thursday, Fed Chair Jerome Powell said the economy's strength and continued tight labor markets could require still tougher borrowing conditions to control inflation, although rising market interest rates could make action by the central bank itself less necessary.
Treasuries have also been hurt by expectations for higher government debt levels and increased bond sales.
COMMENTS:
MICHAEL SCHULMAN, PARTNER & CIO, RUNNING POINT CAPITAL ADVISORS, EL SEGUNDO, CALIFORNIA
«I see the 5% as a psychological threshold but I’ve been telling my clients for over a year that we are in a higher for longer environment, that inflation is going to stay around, higher than it has in the past, and with it interest rates also.»
«Some people will look at this number and fear that things might get worse… simultaneously other people look at these high rates and think that historically this is time to invest.»
NOAH WISE, PORTFOLIO MANAGER, ALLSPRING GLOBAL INVESTMENTS, CHARLOTTE, NC
“I do think that (Powell’s) comments today are definitely a big factor behind the move to 5%. He highlighted what everyone has seen with the strong economic growth data and the retail sales figure that came out. He also signaled that he is fine with tightening coming as a result of longer end rates going higher, even if it means that the shorter end rates don’t need to go as high.”
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