"Continued Tightening" US 10-Year Treasury Yield Surpasses 4.2%... Highest Since 2008

[Asia Economy New York=Special Correspondent Joselgina] The benchmark 10-year U.S. Treasury yield surpassed 4.2% for the first time since 2008.

On the afternoon of the 20th (local time) in the New York bond market, the 10-year yield was trading above 4.228%, up more than 9 basis points from the previous session. This is the first time since 2008 that the 10-year yield has exceeded 4.2%. It surged to as high as 4.228% during the session. The 2-year yield, which is sensitive to monetary policy, also jumped to 4.614%, marking its highest level since August 2007.

On this day, Treasury yields rose amid concerns that the Federal Reserve's (Fed) aggressive tightening would continue due to persistent inflation and strong employment data. As demand for safe-haven Treasuries increased, bond prices fell and yields rose. Last week’s initial jobless claims, released on this day, decreased by 12,000 to 214,000, indicating a still robust labor market. This figure was also significantly lower than the market forecast of 230,000.

Hawkish remarks from Fed officials continued. Patrick Harker, President of the Federal Reserve Bank of Philadelphia, said, "It is disappointing that there has been no progress in curbing inflation," and predicted, "The Fed will continue to raise rates. By the end of this year, rates will exceed 4% by a wide margin." He added, "Inflation soared like a rocket and then fell like a feather," noting that "it will take time to control inflation." Furthermore, he emphasized the need to maintain restrictive interest rate levels for the time being.

Following these remarks, the 10-year Treasury yield expanded its gains in the bond market. Previously, after the last FOMC meeting, the Fed projected a median interest rate of 4.4% by the end of this year and 4.6% for next year through its dot plot.

The Fed is currently expected to implement a giant step (a 0.75 percentage point increase in the benchmark interest rate) again at the November FOMC regular meeting. This would mark the fourth consecutive giant step. According to the Chicago Mercantile Exchange (CME) FedWatch, the federal funds (FF) futures market currently prices in a 99.9% probability of a 0.75 percentage point hike by the Fed in November.

As the 10-year Treasury yield surged, investor sentiment was dampened. About 30 minutes before the close of trading on the New York Stock Exchange that afternoon, the Dow Jones Industrial Average was trading down 0.40% from the previous session. The large-cap focused S&P 500 index was down 0.96%, and the tech-heavy Nasdaq index was down 0.77%.

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