The yields on U.S. Treasury bonds are marching higher following a hot inflation report that has raised expectations for interest rate hikes in coming months.
The yield on the benchmark 10-year U.S. Treasury bond is back above 5% in early trading on Nov. 12. Analysts see 5% as a key level that tends to pressure stocks.
Yields on the shorter dated two-year Treasury and longer dated 30-year government bond are also rising. The 30-year note is currently yielding 5.35%.
Analysts say U.S. Treasurys are on the rise due to a recent inflation report that has renewed expectations for higher interest rates.
Financial markets are now pricing in a 100% chance that the U.S. Federal Reserve will raise interest rates another 25 basis points at its year-end policy meeting on Dec. 9.
The U.S. central bank last raised interest rates in September of this year, its first hike in three years. The move comes with U.S. inflation near an annualized 4%, nearly double the Fed’s 2% target.
Higher yields often entice investors to rotate capital out of stocks and into government bonds that are viewed as a safer investment, leading to declines in share prices.
Wall Street is now waiting for more inflation data that will provide fresh insights into the U.S. economy and likely direction of interest rates in the near-term.
On Nov. 13, the latest monthly producer price inflation data will be released. It tracks wholesale inflation and is expected to show a 0.4% rise in October, lower than 1.3% in September.
U.S. equity markets are down across the board on Nov. 12, with the benchmark S&P 500 index declining 0.73%.
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