/Two-Year Treasury Yield Hits 10-Year High

Two-Year Treasury Yield Hits 10-Year High

This article was originally published on ETFTrends.com.

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Treasury note yields were partly to blame for last week’s stock sell-off and today, those jitters returned with the benchmark yields ticking higher, particularly the short duration 2-year note edging up to 2.903–a level not seen since June 2008.

The longer duration 10-year note went to 3.201, while the 30-year note was at 3.371 as of 11:45 a.m. ET. The 5-year note headed up to 3.058.

Yesterday, the minutes from the Federal Open Market Committee session from Sept. 25-26 were released, which showed Fed members indicating that more rate hikes are likely to come. Last month, the Fed raised the federal funds rate by 25 basis points to its current level of 2.25, citing continued strength in the economy.

As such, the path to higher rates would likely be sustained as long as the economic data continues to support growth.

“With regard to the outlook for monetary policy beyond this meeting, participants generally anticipated that further gradual increases in the target range for the federal funds rate would most likely be consistent with a sustained economic expansion, strong labor market conditions, and inflation near 2 percent over the medium term,” the minutes noted.

“I look at the Fed’s minutes and see nothing but hawkish things. This is not a Fed that’s going to slow down in any way,” said Tom di Galoma, head of Treasury trading at Seaport Global Holdings.

“The Fed is continually worried that the economy is going to overheat and that’s probably one of the biggest issues. … I also think the Fed’s trying to get rates higher in case of a possible slowdown in the next few years so they can reaction with monetary policy,” he added.

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In the meantime, Treasury yield contagion appears to be racking the markets as the Dow Jones Industrial Average fell over 250 points in what has been persistent bouts of volatility in the markets as of late.

“The bottom line is that the long end of the US yield curve has managed to break out for the first time in several years and that other developed market yields have also been moving higher,” said Michael Shaoul, chairman and CEO of Marketfield Asset Management. “The fact that US yields only dropped slightly during last week’s equity rout is a sign that little demand for these instruments was sitting on the sidelines and there are already signs that the long bond is ready to revisit its recent high at 3.44 percent.”

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