The US Treasury bond yield hit its highest level since the financial crisis, as investors signalled their increasing confidence in a steady-state economy that is avoiding crises.
As investors braced for the Federal Reserve’s interest-rate hike campaign, stock futures swayed and bond rates soared to their highest level in three years.
Futures for the S&P 500 edged down 0.1% Monday. Last week, U.S. stocks rebounded for a second consecutive week. Contracts for the tech-focused Nasdaq-100 receded 0.3% and futures for the Dow Jones Industrial Average added 0.1% Monday.
Meanwhile, oil prices fell as money managers fretted that China’s crackdown would stifle demand.
Officials at the Federal Reserve have lately indicated that they are open to the central bank making half-percentage-point interest rate hikes rather than the more common quarter-percentage-point adjustments if the economy’s outlook warrants it. As a result, economists and investors are rethinking how rapidly interest rates will rise.
In preparation, some investors have began dumping their government bond holdings. The yield on the benchmark 10-year Treasury note rose to 2.508 percent on Monday, up from 2.491 percent on Friday, when it reached its highest level in almost three years. When prices fall, yields climb.
Short- and medium-term Treasury yields, which are the most susceptible to Fed policy, rose more than longer-term bond yields.
On March 21, 2022, traders worked on the floor of the New York Stock Exchange.
BRENDAN MCDERMID/REUTERS/BRENDAN MCDERMID/REUTERS/BRENDAN MCDERMID/REUT
The yield on the two-year Treasury note was 2.374 percent on Monday, roughly 0.13 percentage point lower than the yield on the 10-year note. Investors have long monitored an inversion when the two-year note yields more than the 10-year note as a harbinger of recession.
Treasury yields are an important input in financial models used by investors to assess stocks and other assets because they provide a floor on interest rates throughout the economy. The possibility to acquire larger risk-free returns from bonds tends to make investors less interested in firms valued for their longer-term earnings potential, thus rising yields often weigh on tech stocks in particular.
Apple’s stock sank 1.8 percent in premarket trade, while Twitter’s stock slid 0.6 percent.
After Shanghai announced strong epidemic limitations that might reduce energy usage, oil prices plummeted. Brent oil futures fell 3.5 percent to $113.24 a barrel, the worldwide standard. Oil prices have been hovering around $100 a barrel in recent weeks due to concerns about how Russia’s conflict with Ukraine may hamper energy output. Increased costs have fueled fears that consumers would have less money to spend on non-essential things, putting a damper on growth.
“At this point, the market assumes that [increased energy costs] would slow growth and central banks will tighten,” said Mike Bell, global market strategist at J.P. Morgan Asset Management. The extent to which central banks raise interest rates will, however, be determined by global growth and if greater energy and oil costs need lower rates to cushion growth, he said.
Since last week, investors have increased their bets on a 50-basis-point rate hike at the Fed’s May meeting, according to federal-funds futures, which are derivatives used by traders to wager on the course of interest rates.
In a truncated session, Russia’s benchmark MOEX index fell 1.7 percent as Moscow permitted all Russian equities to trade. Foreigners are still unable to sell shares, which helps to maintain the benchmark’s level.
The Stoxx Europe 600 index rose 0.7 percent across the continent. Barclays’ stock fell 3% after the British bank announced it will buy back a slew of structured notes at a loss of roughly £450 million ($591 million) after selling too many.
According to CoinDesk, bitcoin’s dollar value increased 2.2 percent from its 5 p.m. ET level Sunday to $47,106.36.
As the yield on the country’s benchmark 10-year bonds hit the top limit of the Bank of Japan’s target range of 0.25 percent, the Japanese yen plummeted 1.8 percent versus the dollar to a more than six-year low.
The Bank of Japan has attempted to keep increasing yields under control. It said on Monday that it will purchase an unlimited number of 10-year Japanese government bonds at a set rate of 0.25 percent. The yield on the 10-year Treasury note is at 0.24 percent.
Asia’s major indices ended the day with mixed results. The Shanghai Composite Index in China increased by 0.1 percent. The Kospi in South Korea remained unchanged, while the Nikkei 225 in Japan sank 0.7 percent.
Caitlin Ostroff can be reached at [email protected]
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The “u.s. 2 year bond yield” is a measure of how much interest you will get if you invest $1,000 in a two-year U.S. Treasury Bond. The current rate is 3%.
Frequently Asked Questions
What are bond yields right now?
A: The current yield for a 10-year US Treasury bond is 2.34%.
What is the current 10 year bond yield?
A: The current 10-year bond yield is around 2.62%.
What is the current 3 year Treasury rate?
A: On May 16, 2019 the 3-year Treasury Rate was 1.23%.
- 30 year treasury yield
- 3 year treasury bond
- 3 month treasury bill rate
- 5 year treasury yield
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