The 10-year yield flitted around 3 percent on Wednesday.
Deluge Week
For now, bond traders are dealing with a deluge of new debt. This week alone, the Treasury is issuing a combined $96 billion of two-, five- and seven-year notes, the largest slate of fixed-rate coupon sales since 2014. In its $32 billion two-year sale, the notes drew a yield of 2.498 percent, the highest since 2008.
The market is also assessing how quickly the Fed will raise rates. Policy makers’ most recent forecasts are for two additional rate increases in 2018. Traders are pricing in even more than that.
“Other parts of the yield curve have broken out well before this move in 10-year yields,” Briggs said. “The Fed is more confident that it will keep raising rates and that inflation will move to target. The conversations are now that maybe the Fed doesn’t do three but four hikes this year, and maybe three next year.”
Fed officials have largely been sanguine about the stock markets, looking through the pickup in volatility relative to the past couple of years.
But it doesn’t necessarily look like Treasuries will take equity losses in stride, too. So it’s no foregone conclusion that the 10-year yield will rip through 3 percent.
This article was provided by Bloomberg News.