The key US 10 year bond yield gave 3% a nudge on Monday, worrying investors and traders alike. That left it within a whisker of the level last seen four years ago.
At the same time the yield on the 2 year treasury bond got to with a sniff of 2.50%, which was last hit back in 2008 as yield were plunging in the middle of the GFC.
The reason were the usual cast of suspects – fears about higher inflation, rising wages and a flood of new bond issuance to pay for the Trump budget deficits, plus a belief the Fed will tighten faster than expected.
the question for investors is once the 3% level if breached, will that force equity investors to look again at their holdings and switch into higher yielding bonds?
The 10 year yield rose as high as 2.995% ended the session around 2.975%. The yield on the two-year Treasury note was up almost 2bp at 2.48%.
Donald Trump’s election with the promise of economic stimulus has seen bond yields move higher, sending the 10-year yield as high as 2.62% in March 2017 and within sight of the 3% level in February this year as the passage of unfunded tax cuts late last year helped stir inflationary fears.
The yield on Australian 10 year bonds rose 6 basis points (bps) yesterday to 2.86%.
The Aussie dollar was trading around 76 US cents this morning, down three quarters of a cent from Friday’s close.
The Aussie is down 4.8 cents against the greenback since the peak of 80.94 US cents on January 29.
