Post by thekindercarebear (A/S/L) on Apr 26, 2024 15:28:36 GMT
that's wild.
so now there are very strong hints % rates will go up and not down.
NEW YORK (Reuters) — As U.S. inflation worries grow, some investors are preparing for the 10-year U.S. Treasury yield to breach a 16-year high of 5% hit last October.
Bond yields, which move inversely to prices, have climbed in recent weeks as signs of persistent inflation erode expectations for how deeply the Federal Reserve will be able to cut interest rates without further fueling consumer prices. The yield on the benchmark 10-year note is up 80 basis points this year and last stood at 4.70%, a five-month high.
"It all boils down to one word: inflation. If the market doesn't see signs that inflation is contained, then there's no reason that yields won't keep pushing higher," said Don Ellenberger, senior portfolio manager at Federated Hermes. He has decreased his portfolio's interest rate sensitivity, wary that sticky inflation and labor market strength could push yields as high as 5.25%.
Further evidence that inflation is heating up again came on Thursday, with data showing the personal consumption expenditures (PCE) price index excluding food and energy rose far more than expected in the first quarter. Futures markets showed investors now expect the Fed to deliver just 35 basis points in rate cuts this year, compared to the more than 150 points that were priced in at the beginning of 2024.
Bond yields, which move inversely to prices, have climbed in recent weeks as signs of persistent inflation erode expectations for how deeply the Federal Reserve will be able to cut interest rates without further fueling consumer prices. The yield on the benchmark 10-year note is up 80 basis points this year and last stood at 4.70%, a five-month high.
"It all boils down to one word: inflation. If the market doesn't see signs that inflation is contained, then there's no reason that yields won't keep pushing higher," said Don Ellenberger, senior portfolio manager at Federated Hermes. He has decreased his portfolio's interest rate sensitivity, wary that sticky inflation and labor market strength could push yields as high as 5.25%.
Further evidence that inflation is heating up again came on Thursday, with data showing the personal consumption expenditures (PCE) price index excluding food and energy rose far more than expected in the first quarter. Futures markets showed investors now expect the Fed to deliver just 35 basis points in rate cuts this year, compared to the more than 150 points that were priced in at the beginning of 2024.
"Inflation is not coming down like the Fed thought it was," said Arthur Laffer, president of Laffer Tengler Investments, who is bearish on longer-dated Treasuries and believes yields could rise as high as 6%.