/U.S. Yields Resurgent as Inflation Expectations Hit Decade High – Yahoo Finance

U.S. Yields Resurgent as Inflation Expectations Hit Decade High – Yahoo Finance

(Bloomberg) — U.S. Treasuries tumbled anew on Wednesday, driving long-maturity yields to their highest levels this week and pushing up inflation expectations as traders continued to price in a quicker economic rebound from the pandemic.

Benchmark 10-year Treasury yields surged as much as 10.3 basis points to 1.495%, putting them on track for the highest close since last Thursday’s startling selloff in government debt. Meanwhile, a market proxy for the anticipated annual inflation rate for the next half-decade exceeded 2.5% for the first time since 2008 — aided by climbing oil prices. At least part of the trigger for the fixed-income losses came from the U.K., which said it will sell more bonds than expected as its economy emerges from a deep recession.

Also in the background was Joe Biden’s announcement that enough doses of virus vaccine should be available to every American adult by the end of May, and a report Wednesday that the president would moderate certain stimulus demands to try to win support for his virus-relief bill. Rising yields have started to draw the attention of Federal Reserve officials, leaving all eyes on an appearance Thursday by Chair Jerome Powell.

“Risk is coming back on, the stimulus package is likely to go through and the economy is reopening,” said Michael Franzese, managing partner at MCAP LLC in New York. “The battle is on between rates going higher super-fast and a Federal Reserve that’s trying to keep the market stable and may try to slow the momentum of the reflation and economic-rebound trade into something more manageable.”

Early inklings of inflation were evident in data from the Institute for Supply Management this week: Measures of prices paid jumped to their highest levels since 2008.

A large trade on Wednesday in 10-year Treasury options and accompanying futures selling also fueled the leap in yields, as did heavy corporate bond supply.

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