Yields on U.S. Treasuries have hit levels not seen in more than a decade after the Federal Reserve signalled that interest rates in America are likely to stay higher for longer.
Bond yields are spiking as stocks selloff in the wake of the latest outlook on interest rates from the U.S. central bank, which forecasts at least one more rate increase this year followed by two rate cuts in 2024.
The 30-year Treasury bond yield has risen to 4.55%, its highest level since 2011, while the 10-year Treasury yield is at 4.479%, its highest position since 2007.
The two-year bond yield has reached 5.148%, its top level since 2006.
The spike in bond yields comes as all three major stock indices in the U.S. (the Dow, Nasdaq, and S&P 500) declined for three consecutive days.
The U.S. Federal Reserve’s latest forecast of one more rate hike this year and two fewer rate cuts in 2024 than previously expected has led to a pronounced selloff in stocks, which are viewed as riskier investments than government bonds.
The bond market’s yield curve has now been inverted for 14 consecutive months. Yield curve inversions are typically viewed as a sign of an impending recession, though none has yet occurred in the U.S. despite interest rates sitting at a 22-year high.
The latest jobless claim numbers in the U.S. were weaker than forecast, indicating that the American economy remains stronger than many economists had expected in the face of rising interest rates.
