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QUOTES-U.S. Treasury yields spike as Fed, central banks look to taper, raise rates

09/23/2021 | 01:56pm EDT

NEW YORK, Sept 23 (Reuters) - U.S Treasury yields rose across the board on Thursday, with those on benchmark 10-year notes climbing to their highest in more than two months. U.S. 30-year yields also rose, on track for their largest gain in three months. Global central banks led by the Federal Reserve have turned hawkish as the economic outlook around the world improved and inflation picked up.

U.S. 10-year yields were last up 6 basis points $1.3959% .

TIM GHRISKEY, CHIEF INVESTMENT STRATEGIST, INVERNESS COUNSEL, NEW YORK "It's post-Fed meeting noise, but (the Fed) noted that inflation is elevated, and they increased their PCE forecasts. The Fed is not worried about what they consider transitory inflation, but that was quite a jump in forecasts." "And the number of Fed members that see rate increases next year went from 7 in June to 9 in September." "You're going to see these periods where the market is anticipating tapering and tightening and that could be causing selling of Treasuries on the long end, resulting in higher yields." "The rest of the world is seeing this economic improvement. But it's against the pandemic period, so of course you're going to see improvements. Yields are low throughout the developed world and you'll see rates go up over time. All global banks are moving glacially, conditional on continued economic improvement. But as long as the global economy continues to improve, you're going to see rates drift higher."

ZACHARY GRIFFITHS, MACRO STRATEGIST, WELLS FARGO, CHARLOTTE, NORTH CAROLINA "It's quite the move today. The message from the Fed yesterday was more hawkish than the market had anticipated and certainly more hawkish than anticipated in a few different ways. I guess you have a bit of a delayed reaction. I suppose when you think about the 2022 median dot moving up about an eighth of a percent that's certainly an interesting development and would suggest that at least some, I guess half of the policymakers seem comfortable with hiking rates pretty shortly after the taper would finish up." "Take a step back and just think about how low yields are even relative to where we were in the first quarter of this year. So I think you're seeing just a retracement of some of that as we do have very high inflation, high economic growth forecasts and it's really been kind of hard justify where yields have been up to this point."

GENNADIY GOLDBERG, SENIOR RATES STRATEGIST, NEW YORK "Today was ongoing repricing after the FOMC and a hawkishness from the BOE (Bank of England), which also pushed developed market rates a bit higher."

IAN LYNGEN, HEAD OF U.S. RATES STRATEGY, BMO CAPITAL, NEW YORK (FROM AN EMAIL) "Today's bearish price action in Treasuries is one of those classic moves that simultaneously has no obvious explanation and all the justification in the world. The list of bearish factors behind the spike in U.S. rates includes, 1) continued bounce in stocks, 2) seasonals favoring steepening and higher yields in October, 3) limited contagion from the Evergrande situation, 4) pricing in the Fed's updated dot plot, 5) ECB chatter regarding higher euro-zone inflation risks, 6) German bund yields at their highest since early-July (-25 bp), 7) a technical breakdown with 10s north of 1.40%, and 8) a retrading of a hawkish Fed." (Reporting by Stephen Culp, Karen Pierog, and Gertrude Chavez-Dreyfuss Editing by Nick Zieminski)


© Reuters 2021
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