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Treasury selloff sends yields racing past limits of bullish era

With the Federal Reserve poised for an aggressive cycle of interest-rate hikes, 10-year yields have surged to nearly 2.5%, the highest since May 2019 and up more than a full-percentage point since early December

March 27, 2022 / 10:49 AM IST
The 10-year yield has tested the threshold before only to snap back each time, rewarding investors who saw it as a buying opportunity and burning bears who thought it signaled the market was finally past its peak. It’s possible such a pull-back may happen again. Photo: Bloomberg

The 10-year yield has tested the threshold before only to snap back each time, rewarding investors who saw it as a buying opportunity and burning bears who thought it signaled the market was finally past its peak. It’s possible such a pull-back may happen again. Photo: Bloomberg

The deepening bond-market selloff has driven Treasury yields past a threshold that could signal the end of a decades-long bull run.

With the Federal Reserve poised for an aggressive cycle of interest-rate hikes, 10-year yields have surged to nearly 2.5%, the highest since May 2019 and up more than a full-percentage point since early December. That’s a far faster and steeper increase than before other monetary-policy tightening cycles, and it has already driven the benchmark yield past a technical trend line that has effectively served as a ceiling since the late 1980s.

The 10-year yield has tested the threshold before only to snap back each time, rewarding investors who saw it as a buying opportunity and burning bears who thought it signaled the market was finally past its peak. It’s possible such a pull-back may happen again.

But with the Fed now facing the biggest inflationary surge since the 1980s, wages rising in a tight labor market, and Russia’s Ukraine war dealing fresh commodity-price shocks, a growing chorus on Wall Street is predicting that yields will continue to rise as the central bank steadily raises rates in the months ahead. The 10-year rate has particularly broad impacts, since it serves as a key benchmark for longer-term consumer and corporate loans.