Benchmark U.S. bond yields on track for higher rise since 2013

© Archyde.com/Andrew Kelly Archive image of the Treasury Department building’s exterior in Washington, D.C.

By Karen Brettell

NEW YORK, December 31 – Key 10-year U.S. Treasury notes are poised to conclude the year with their most substantial yield increase since 2013. This upward trajectory reflects investor preparedness for potential Federal Reserve interest rate hikes, possibly as early as May.

The U.S. central bank faces mounting pressure to counteract accelerating inflation, which has proven more persistent than initially anticipated, coinciding with the nation’s economic recovery from pandemic-related restrictions.

Market participants, using Fed fund futures, predict a single interest rate increase in May and approximately three more by year-end 2022.

The 10-year note’s yield has surged 59 basis points this year, on track for its most significant annual increase since 2013’s 127-basis-point jump.

Two-year note yields, highly sensitive to interest rate adjustments, have climbed 60 basis points in 2022, positioned for their largest annual gain since 2018.

The yield difference between two-year and 10-year notes currently stands at 78 basis points, exhibiting only a slight decrease from its 79-basis-point close in the previous year.

Five-year Treasury securities have been the year’s strongest performers, experiencing a 90-basis-point increase – their most substantial improvement since 2013.

The Federal Reserve will release minutes from its December 14-15 meeting next week. Analysts will thoroughly examine these records for further clues regarding the institution’s potential for quicker action to curb inflationary pressures.

(Edited in Spanish by Carlos Serrano)