Tightening Warnings Deepen Amid Soaring Prices... US 10-Year Treasury Yield Surpasses 2%

[Asia Economy New York=Special Correspondent Joselgina] The yield on the U.S. 10-year Treasury bond surpassed the 2% mark for the first time since August 2019. This follows the release of data showing that U.S. inflation in January surged at the fastest pace in 40 years. There are also growing expectations that the Federal Reserve (Fed), the central bank, will signal tighter monetary policy going forward.

On the afternoon of the 10th (local time) in the New York bond market, the yield on the U.S. 10-year Treasury bond stood at 2.036%, up 0.109 percentage points from the previous close. The 10-year yield, a key indicator for long-term investment, exceeded 2% for the first time since August 2019. The yield started the day at 1.939% and reached as high as 2.05% during the session. At the same time, the 2-year Treasury yield was hovering around 1.599%.

This rise in Treasury yields was driven by the release of the U.S. Consumer Price Index (CPI) for January, which exceeded market expectations and heightened concerns about tightening monetary policy. The January CPI surged 7.5% year-over-year, marking the largest increase since February 1982. This increase surpassed both market forecasts and the previous month’s rise of 7.0%. The core CPI, which excludes volatile energy and food prices, also jumped 6.0% year-over-year.

Accordingly, the Fed is expected to accelerate its tightening measures, including interest rate hikes. According to the FedWatch tool by the Chicago Mercantile Exchange (CME) Group, which estimates the probability of monetary policy changes based on federal funds rate (FFR) futures prices, the probability of a 0.5 percentage point rate hike in March rose sharply from 25% to 44.3% following the CPI release. The likelihood of six rate hikes this year also increased from 53% to 63%.

If inflation data for February again exceeds market expectations, there is a possibility that the number of rate hikes within the year will increase or that the Fed may adopt a high-intensity measure of a single 0.5 percentage point hike.

Steep rate hikes are expected to inevitably impact not only the stock market but also economic growth. Barry Gilbert, strategist at LPL Financial, said, "January inflation surprised the market again, fueling concerns that the Fed may act aggressively. Until clear signs emerge that inflation is under control, market anxiety over the possibility of intensified Fed tightening will persist."

Major indices on the New York stock market are also falling across the board. As of 3:28 p.m., shortly before market close, the tech-heavy Nasdaq index was down 1.82% at around 14,227 points compared to the previous close. The Dow Jones Industrial Average fell 1.31%, and the S&P 500 index declined 1.56%.

This content was produced with the assistance of AI translation services.