U.S. Treasury yields rose to a two-year high

U.S. Treasuries have recently suffered a sell-off as the market expects the Fed's monetary policy tightening to increase during the year, with yields rising to a two-year high.

Interest rate exchange market conditions showed on the 18th that the Fed is expected to raise interest rates by more than 25 basis points before the end of March. With the Fed not anticipating action at its meeting at the end of the month, this means that traders are considering the possibility of raising rates by as much as 50 basis points in March. The Fed has never raised rates by 50 basis points since May 2000.

Recently, the forecast that the Federal Reserve may raise interest rates more sharply has heated up, triggering a sell-off in the US Treasury market on the 18th, driving the yield to rise rapidly. JPMorgan Chase CEO Dimon warned last week that the Fed's tightening actions may not be as "gentle and dovish" as some had expected. Billionaire investor Ekman said the Fed should raise interest rates by 50 basis points in March.

Nielsen, who served as the Fed's chief economist for bank policy, said in a note on the 18th that the Fed "must prepare the public for the possibility that they will raise interest rates by 50 basis points in March." He said central banks are lagging behind the changing tide and must be prepared to accelerate tightening if necessary, and central banks must avoid falling into a path that convinces markets that rate hikes will only be gradual.

The Economist Intelligence Unit issued a report on the 18th that the Federal Reserve will gradually raise interest rates from March, will raise interest rates four times this year and next year, and will increase them again by the beginning of 2024, so that the target interest rate of federal funds will rise to a level of about 2.4% between 2024 and 2026, which will make the money market interest rate turn positive for the first time since the global financial crisis from 2008 to 2009.

Under the expectation of interest rate hikes, the 10-year US Treasury yield has risen by 36.8 basis points since 2022, with a cumulative increase of 24.4%, and is currently at a high of 1.682%. This climbing rate hit the strongest sell-off in the bond market since the first quarter of last year. In the last 2 days, the yield has risen by 10%.

The 10-year Treasury note is the most active variety of US Treasuries, and its yield is widely recognized as a "risk-free yield", which determines the lower limit of the yield of various types of assets and is regarded as the "anchor" of global asset pricing. It reflects the term premium for funds in the market, the demand for safe assets, and future inflation expectations.

In addition, due to global market concerns about tightening pressures, there has been a recent killing market. Undertaking the European and American markets fell overnight on the 18th, the Asia-Pacific market fell on the 19th: the two major stock indexes of the Tokyo stock market opened low and went low, falling sharply, the average price index of Nikkei 225 stocks fell sharply by 2.80% at the end of the session, the stock price index of the Tokyo Stock Exchange fell sharply by 2.97%; the KOSPI index of South Korea fell 0.77% to close at 2842.28 points, the lowest closing price since November 30, 2021; the Australian S&P/ASX200 index fell 1.03%, Closed at 7332.50.

Author: □ reporter Yan Lei Comprehensive report

Source: Economic Reference