Central banks are turning “hawkish” in the face of inflation.
(Bloomberg) — Treasuries fell, sending 10-year yields to a three-month high, as traders braced for a testing week of heavy bond auctions and continued to digest the prospect that central banks in the U.S. and Europe will step up the pace of policy tightening.
The yield on 10-year Treasuries reached 1.51%, the highest since June, before settling at 1.48%. The yield has climbed 16 basis points over the past week as the Federal Reserve signaled it may start reducing its asset purchases in November and raising rates as soon as next year. Yields on two- and five-year Treasuries hit their highest levels since early 2020, with a combined $121 billion of the securities set to be sold Monday. A seven-year auction is due Tuesday.
While Treasuries briefly extended the selloff after a report showed durable goods orders exceeded economists’ forecasts, they started to pare losses after U.S. equity futures soured.
Bond yields increased across the globe last week as central banks move to reduce pandemic stimulus. The Bank of England surprised markets by raising the prospect of increasing rates as soon as November, and Norway delivered the first post-crisis hike among Group-of-10 countries. In the U.S., traders pulled forward wagers on an interest-rate increase to the end of 2022 following last week’s Fed meeting.
On the equity side, FAANG stocks trail the S&P 500 as 10-year Treasury yield climb.
We have the 10-year Treasury yield climbing above the S&P 500 dividend yield.
Here are The Fed and The ECB turning “hawkish.”