10-year yield continues to surge, hitting its highest stage since June

The benchmark US 10-year Treasury yield rose again on Tuesday, trading at its highest level since June and continuing the steady rise that began last week.

The benchmark ten-year government bond yield rose 6.2 basis points to 1.546% after hitting 1.567% earlier in the day. The yield on the 30-year government bond rose nearly 10 basis points to 2.094%. The returns move inversely to the prices and 1 basis point equals 0.01%.

Federal Reserve Chairman Jerome Powell warned in prepared remarks to the Senate on Tuesday that higher inflation could last longer than expected. The central banker said economic growth “continued to strengthen” but faced inflation caused by supply chain bottlenecks and other factors.

“Inflation is up and likely to remain so for the months ahead before it eases,” Powell said.

Last week the Fed hinted that it may soon begin to pull back on its bond purchases. The central bank’s updated economic forecasts also showed that half of major Fed officials now expect a rate hike in 2022.

The central bank updates appear to have spiked yields across the time curve. The rise in 10-year yield comes after bonds traded at 1.30% in late August. The 30-year government bond is trading at its highest yield since early July, while the 5-year yield was at its highest level since early 2020, before the Covid pandemic hit the United States.

Sevens Report’s Tom Essaye says the 10-year price is now trading at important levels that could prove to be a turning point for even bigger move.

“The focus is now on the all-important mid-range of 1.50%, which is the trendline from the highs of the 10-year return at the end of March. If the economic and inflation data is solid this week and the 10-year yield breaks the mid-range of 1.50% and closes near (or above) 1.60% this week, investors will be looking for a continuation of the rise in yields looking for the March high of 1.74%, “said Essaye in a statement to customers on Tuesday morning.

The Fed and other central banks are taking monetary tightening steps as investors remain concerned about inflationary pressures, with rising energy prices being one of the most recent concerns in Europe.

“It’s pretty clear that a global business cycle had already started before the recent mini-energy crisis. Will this renewed spike in energy costs cause central banks to speed it up … or will it hit demand so hard that it actually slows it down? incredibly delicate and difficult time for the central banks, “said Jim Reid of Deutsche Bank in a message to customers.

On the data front, the July S&P / Case-Shiller house price index showed prices that month were up 19.7% year over year. The Conference Board’s consumer confidence came in at 109.3, below 114.9 expected by economists polled by Dow Jones.

In addition, investors will continue to monitor the progress of the $ 1 trillion infrastructure bill in Washington. Legislators must put a funding plan in place before the government faces a shutdown on Friday.

An auction for seven-year notes valued at $ 62 billion was held on Tuesday.

– CNBC’s Jeff Cox and Maggie Fitzgerald contributed to this market report.