The yield on the benchmark 10-year US Treasury rose to its highest level in over a month on Tuesday, inching above its 50-day moving average for the first time since March 20.

It comes amid expectations that the Federal Reserve will raise its target interest rate in June, with the market-implied probability of an increase hitting to 100 per cent last week. The Treasury will also issue 3-year, 10-year and 30-year debt this week.

But for some, the relatively low level of yields continues to be cause for concern, with the fear that interest rates could move sharply higher as the Fed normalises interest rates and contemplates winding down its balance sheet.

“The FOMC likely will announce its new Balance Sheet ‘Tapering Program’ over the next few months – yet, still, Treasury yields are lower than where they were in mid-March when far less hawkishness was priced into the yield curve…We caution our clients against being complacent,” wrote John Herrmann, rates strategist at MUFG.

Get alerts on Federal Reserve when a new story is published

Copyright The Financial Times Limited 2020. All rights reserved.
Reuse this content (opens in new window)

Comments have not been enabled for this article.

Follow the topics in this article