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FILE PHOTO: US dollar bills are seen in front of a stock chart
By Rodrigo Campos
NEW YORK, April 8 (Archyde.com) – The 10-year Treasury yield hit a three-year high on Friday above 2.7% and the two-year/10-year rate spread held near its highest level this week, as traders bet on a more aggressive stance from the Federal Reserve.
* The 10-year return hit 2.73%, its highest level since March 2019, and that on 10-year inflation-protected securities came within 15 basis points of turning positive for the first time in more than two years .
* The strong move higher this week began on Tuesday after dovish Fed Governor Lael Brainard’s comments shifted the focus from rate hikes to Fed balance sheet reduction.
* The recent move higher “reflects perceptions that the Fed is willing to do more than is necessary to reduce inflation, but also possibly what is necessary to slow economic growth,” said Guy LeBas, chief fixed income strategist. Janney’s in Philadelphia.
* Some technical indicators show returns at a turning point, meaning they could struggle to go much higher. However, if they do, there would be little technical resistance to taking another step forward.
* Two-, five- and 10-year Treasury yields hit multi-year highs this week, with the 2/10 yield spread turning positive after inverting late last week.
* The nearly 27 basis point widening of that spread so far this week is the largest of any week since June 2013, and follows last week’s curve-inverting 27.5 basis point tightening, tightening steepest weekly since September 2011.
* The 10-year yield rose 5.2 basis points to 2.706%, while the 2-year note gained 5.8 basis points to 2.520%, leaving the 2/10 spread at 18.41 basis points.
(Reporting by Rodrigo Campos, Edited in Spanish by Manuel Farías)