U.S. Treasury yields surge to 4.3%, long-term bonds sold off, causing a steepening curve

Source: BlockMedia Original Title: [New York Bonds] US 10-Year Treasury Yields Surge to 4.3%…Long-Term Sell-Off ‘Bear Steepening’ Original Link: https://www.blockmedia.co.kr/archives/1034309 The New York bond market experienced a simultaneous rise in US Treasury yields on the 20th. The yields on the 10-year and 30-year bonds reached multi-month highs, and the short-term and long-term yield spreads widened to their largest margins in two weeks. The president’s tariff threats combined with a sharp rise in Japanese bond market yields, putting pressure on long-term bonds.

On that day, the US 10-year Treasury yield (US10Y) traded at 4.295%, up 6.8 basis points (1.61%) from the previous day. The intraday high touched 4.313%, the highest level since late August last year.

The 30-year yield rose 7.8 basis points to 4.918%, reaching a new high since September last year. The 2-year yield slightly declined (1bp↓) to 3.591%. As a result, the 2-year to 10-year yield spread widened to 70.9 basis points, forming the steepest bearish curve in about two weeks.

This indicates that the market’s expectation for short-term rate cuts has receded, but the reflection of long-term inflation and risk premiums has expanded. Federal funds futures show the market expects fewer than 2 rate cuts (47bp level) this year, below last year’s expectation (53bp).

The sharp rise in bond yields is driven by the president’s remarks. He stated, “If the US fails to purchase Greenland, tariffs of 10% will be imposed on 8 European countries starting from February this year, rising to 25% in June.” The EU countered that this “constitutes economic coercion,” which investors interpret as a signal of safe-haven US assets.

Volatility in the Japanese bond market also affected US Treasury yields. The 20-year Japanese government bond auction was weak, compounded by the effect of the early election announcement on February 8, causing long-term bond yields to surge. This trend has transmitted to global bond markets. A leading institutional strategist said, “The sell-off in the Japanese bond market clearly stimulated the rise in US long-term bond yields.”

Technical caution is also increasing. A chief strategist at a financial institution analyzed, “The 10-year yield breaking above the previously considered key resistance level of 4.20% makes further rises to 4.50% in the short term possible.”

The medium- to long-term direction still depends on economic indicators and central bank policy stances. A head of a trust institution commented, “Given the relatively stable US labor market and growth trend, the likelihood of the Fed maintaining a pause is higher than rushing to cut rates,” and pointed out, “This year’s key in the bond market will be how much the market reflects inflation and fiscal risks.”