10-year Treasury yield jumps to 14-month high

US stocks tumble in pre-market following bond yield rise

The 10-year US Treasury yield rose to its highest point in 14 months on Thursday, despite the Federal Reserve committing itself to continued ultra-low interest rates for the foreseeable future.

The 10-year yield rose by almost 10 basis points in early morning (EDT), to as high as 1.753 per cent, while the 30-year yield jumped above 2.5 per cent for the first time since mid-2019.

After the conclusion of a two-day policy meeting on Wednesday, the Federal Reserve admitted that it expects to see inflation consistently above its target of 2 per cent, with core inflation for 2021 reaching as high as 2.4 per cent.

Inflation anxiety has only increased in the aftermath of President Joe Biden’s $1.9trn (£1.3bn, €1.6bn) stimulus package. Passed to help the US economy recover from the ravages of Covid-19, the stimulus is larger than the entire cost of the second war in Iraq.

The Fed also said it would continue the purchase of at least $120bn of bonds per month and to not raise interest rates until 2023 at the earliest.

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The United States’ three leading indices all closed up following the central bank’s commitment to a continued dovish approach, with Asian markets following suit. The Nikkei 225 and the Hang Seng indices closed Thursday up 1 and 1.2 per cent, respectively.

Such momentum proved short-lived, however, as a result of the rise in bond yields. Dow futures stood flat in pre-market trading, while S&P and Nasdaq futures stood 0.5 and 1.4 per cent lower, respectively.

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