Treasury Yields Hit Highest Since 2007 on Elevated Rate Fears

The US bond-market selloff resumed Monday, driving 10-year yields to a 16-year high, as the persistently resilient economy has investors positioning for interest rates to remain elevated even after the Federal Reserve winds up its hikes.

The selling pressure weighed on typical Treasuries as well as those that provide extra payouts to cover inflation, signaling bondholders are bracing for the risk that monetary policy will remain tight as the central bank guards against a re-acceleration in inflation.

The yield on 10-year inflation-protected Treasuries on Monday pushed over 2% for the first time since 2009, extending its ascent from year-to-date lows near 1%. Not long after, the yield on 10-year Treasuries without that protection surpassed October’s peak, climbing nearly 10 basis points to as much as 4.35%, a level last seen in late 2007, before slightly paring the gain.

The policy-sensitive two-year yield also briefly pushed over 5% late in the New York trading day, leaving it shy of the 2023 peaks notched early last month and in March.

The jumps extend the major shift that has raced through the bond market over the past two weeks as the odds of a recession recede and large federal budget deficits increase the supply of Treasury debt. That’s driven investors to sharply push up rates on longer-term bonds, which had tumbled deeply below those on short-term ones due to fears the economy was poised for a contraction.

Multi Decade Peaks For US 10 Year Yields