US Treasury yields extend gains after 10-year breaks 3% mark

US Treasury yields extend gains after 10-year breaks 3% mark

Expectations of rising inflation, which may encourage the USA central bank to tighten monetary policy more quickly, caused the yield on the benchmark 10-year Treasury note to hit a key psychological level of 3% Tuesday - for the first time since January 2014.

But just as importantly, higher bond yields offer a safer alternative for generating income, something largely lacking through years of rock-bottom rates after the financial crisis. Another reason: inflation is showing signs of picking up, which erodes the value of bonds' fixed payments and leads investors to demand higher yields. Increased supply weighs on bond prices and yields move inversely to those prices. Stocks are no longer the only game in town.

Euro zone bond yields, swept up in the Treasury market momentum, inched down from multi-week highs before the meeting, and the euro firmed off eight-week lows against the dollar.

More: Does Warren Buffett invest in gold? The 10-year yield stood at 2.43 percent at the end of 2017. The yield inched past 3 percent shortly after the open of stock trading on Tuesday before pulling back slightly.

Kuroda has stuck to his well worn dovish script overnight but this is old news, and the USDJPY continues to climb due to the United States dollar bid while triggers some stops along the way above 108.30 level.

Moreover, it's a threat to riskier assets beyond just US stocks. The yield on the 10-year Treasury note continued to trade at four-year highs, rising to 2.98 percent from 2.96 percent. Australian markets were closed for Anzac Day, a public holiday.

Market sources say rising crude oil prices are fueling speculation of higher inflation.

Not all investors were ready to seize on the 10-year's move as the spark to shift money around, especially in the midst of a corporate earnings season that is on track to be the strongest period in more than seven years.

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Among smaller banks, Simmons First National rose 3.8 percent to $30.05 and Banner gained 4.4 percent to $58.26. It hadn't reached 3 percent since early January of 2014.

Ten-year Treasury yields, the reference rate for global borrowing, extended their yield surge.

"Structurally, we still favour lower bond yields but the USA tends to drive everything".

In recent weeks, peripheral government bonds - seen as beneficiaries of the ECB's bond-buying scheme - have performed strongly compared to better-rated peers.

So far in 2018, about $67 billion (£47.94 billion) on a net basis has flowed into all equity mutual and exchange traded funds, bringing the total in such funds to $12.3 trillion, according to Lipper data.

Some investors were shrugging off the 10-year's milestone, preferring to watch the path of rates from here.

"It's a round number and one we haven't touched too frequently, so it's going to get some attention", said Mark Luschini, chief investment strategist at Janney Montgomery Scott. "If rates rise quickly from here, I think that's a headwind for stocks and for the economy".

"Slowly but surely we are seeing improvement there", Hamrick said.

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