NEW YORK — US Treasury yields reached
three-year highs on Monday as investors adjusted for the Federal
Reserve to aggressively raise rates as it tries to stem soaring
inflation that is running at its fastest pace in 40 years.
Data last week showed that the consumer price index jumped
1.2% last month, the biggest monthly gain since September 2005.
In the 12 months through March, the CPI accelerated 8.5%, the
largest year-on-year gain since December 1981.
The Fed is now expected to hike rates by 50 basis points at
its May and June meetings, at least. Fed funds futures traders
are expecting the Fed’s benchmark rate to rise to 1.28% in June
and to 2.67% next February, from 0.33% now.
Housing data will be in focus this week for signs on whether
a rapid jump in mortgage interest rates is beginning to dent
demand, with houses already having become less affordable due to
“We’re probably going to start to see the beginning of some
demand destruction in the housing market because of the rise in
mortgage interest rates,” said Thomas Simons, a money market
economist at Jefferies in New York.
“I don’t think it’s enough to really spook the Fed away from
their pretty aggressive take on how to address inflation,”
Simons said, however, “it will probably start to give those
folks who are talking about a recession in a near-term time
horizon, it’ll give them a little more ammunition for the
argument and could lead to yields leveling out.”
Housing data this week will include home builder sentiment
on Monday, housing starts on Tuesday and existing home sales on
Thirty-year mortgage rates have jumped to 5.13%, from 3.33%
at the end of December.
Concerns that the Fed will dent growth with its aggressive
tightening increased after the yield curve between two-year and
10-year notes inverted last month, which has historically been a
reliable indicator that a recession will follow in
That part of the yield curve steepened back to
36 basis points on Monday, after inverting by as far as 10 basis
points on April 4. Benchmark 10-year yields were
last 2.820%, after reaching 2.884% earlier on Monday, the
highest since Dec. 2018.
Some of the move higher in yields on Monday was also seen as
due to relatively light trading volumes with London closed for
the Easter Monday holiday.
April 18 Monday 9:38AM New York / 1338 GMT
Price Current Net
Yield % Change
Three-month bills 0.765 0.777 -0.010
Six-month bills 1.215 1.2393 0.025
Two-year note 99-156/256 2.4562 0.012
Three-year note 99-222/256 2.6715 0.006
Five-year note 98-200/256 2.7651 0.005
Seven-year note 97-52/256 2.821 0.005
10-year note 91-240/256 2.82 0.012
20-year bond 89-96/256 3.096 0.005
30-year bond 86-220/256 2.9122 -0.005
DOLLAR SWAP SPREADS
Last (bps) Net
US 2-year dollar swap 25.00 -0.50
US 3-year dollar swap 13.00 -0.75
US 5-year dollar swap 4.75 0.00
US 10-year dollar swap 4.50 0.25
US 30-year dollar swap -20.50 0.00
(Editing by Alison Williams)