Yields on the 10-year U.S. Treasury note hit a fresh two-year high in early trade on Friday (June 25) as investors expected a more aggressive Federal Reserve.
10-year yieldIt touched 2.475%, the highest level since May 9, 2019.
The yield on the benchmark 10-year U.S. Treasury note rose 12.1 basis points to 2.464% at 10 a.m. ET. The 30-year U.S. Treasury yield rose 8.8 basis points to 2.6%. Yields are inversely proportional to prices, with 1 basis point equal to 0.01 percentage points.
The Fed is likely to take a more aggressive move in its rate hike cycle. Chairman Powell said on Monday (21st) that “inflation is too high” and stressed that the Fed will continue to raise interest rates until inflation is contained.
“If we concluded that more aggressive action to raise the federal funds rate by more than 25 basis points at one or more meetings was appropriate, we would Do.”
After Powell’s speech, some market participants raised their rate hike expectations. Goldman Sachs on Monday raised the rate hike to 50 basis points at the Fed’s May and June meetings.
Bank of America also joined the ranks of expected rate hikes.The bank expects to raise rates by 50 basis points in June and July and 25 basis points in all other meetings before the end of the year
“The Fed has accepted that it is behind the curve and will be encouraged by the resilience of the economy and financial markets,” Bank of America economist Ethan Harris said in a note. “The question that remains is whether it is willing to The economy is inflicting severe pain to control inflation.”
Investors also focused on the latest news on the war in Ukraine. NATO on Thursday (24th) deployed additional troops on its eastern flank. In addition, the U.K. and U.S. announced more sanctions on Russian elites and officials.
US President Joe Biden said NATO would respond “relatively” if Russia used weapons of mass destruction in Ukraine.