SELLOFF: Stocks, bonds, and commodities crushed… Interest rates soar most since 2011… If the Fed is right… it’s likely bond yields will continue to rise…
Treasury 10-year (USGG10YR) note yields climbed to a 22-month high as government bonds tumbled from Germany to New Zealand after Federal Reserve Chairman Ben S. Bernanke said policy makers may end bond purchases in mid-2014.
The U.S. yields pared the advance as riskier assets slid and the high rate levels drew investors. Yields surged the most since 2011 yesterday, when Bernanke said the Fed may slow its $85 billion in monthly buying under quantitative easing later this year if growth is in line with its forecasts. A Bloomberg survey said it will cut purchases by $20 billion in September. A sale of U.S. inflation-linked debt drew below-average demand.
“Bernanke made it clear that tapering QE was on the table,” said Ian Lyngen, a government-bond strategist at CRT Capital Group LLC in Stamford, Connecticut. “The fact that a QE story has taken out a lot of the bid for stocks has on the margin kept the Treasury sell-off from exacerbating, but in the wake of the Bernanke press conference, the bearish sentiment in the Treasury market appears likely to be with us for a while.”
The 10-year Treasury yield increased seven basis points, or 0.07 percentage point, to 2.43 percent at 2:52 p.m. New York time and reached 2.47 percent, the highest since Aug. 8, 2011, according to Bloomberg Bond Trader prices. It jumped 17 basis points yesterday, the most since October 2011. The price of the 1.75 percent security due in May 2023 dropped 5/8, or $6.25 per $1,000 face amount, to 94 3/32.
The 30-year bond yield rose above 3.5 percent for the first time since September 2011, reaching 3.55 percent. Seven-year note yields climbed as much as 11 basis points to 1.89 percent, the highest level since August 2011, before trading at 1.85 percent, up seven basis points.