TOKYO, Feb. 17 (Reuters) – U.S. 10-year benchmark yield rose to its highest level in a year on Wednesday in Asia as progress in passing a fiscal stimulus package passed high and expected inflation rates rising.
Yield on 10-year financials climbed to 1.3290%, the highest level since February 27 last year, before pulling back to 1.3023%.
The U.S. 30-year yield took some time to a high of 2.1120% and then pulled back slightly to 2.0838%.
U.S. President Joe Biden is drumming support for Covid’s $ 1.9 trillion relief package. Inflation is also expected to rise as extremely cold weather pushes oil and gas production at the U.S. energy hub in Texas.
Both factors are bearish for Treasury prices, leading to strong upward pressure on output. Some analysts say that yields are likely to rise further as a strong accumulation in global stock markets causes many investors to shift money from bonds to shares.
“We would not expect the stock / bond relationship to break down as the US 10-year yield is below 2%, especially if the central banks’ liquidity supply remains adequate and the growth background still positive, ”analysts JP Morgan wrote in a research memorandum.
The spread between two-year and 10-year yields, which is the closest part of the yield curve, hit a near-four-year high of 120.80 basis points before smoothing slightly to 118.20 basis points.
The curve between five-year and 30-year output was at 151.00 basis points, just shy of the highest level since 2015.
Market capitalization has allowed the U.S. Federal Reserve to allow consumer prices to exceed 10-year inflation expectations to push them to the highest level since 2014, with the rate of inflation breaking Security under the last protection at 2.246%.
The Fed will release minutes from its most recent policy meeting on Wednesday, which will be closely monitored for any comments on the outcome.
An important test faces the bond market later Wednesday with an auction of $ 27 billion of 20-year pounds.
Reporting by Stanley White Editing by Shri Navaratnam