The US Treasury’s 10-year yield reached 1.64% on Wednesday morning, reaching a new 13-month high, before a press conference with Federal Reserve President Jerome Powell after the policy meeting two-day period from the central bank.
The yield on the 10-year reference Treasury note increased to 1.644% at 6 am ET. Yield on 30-year Treasury bonds rose to 2.395%. Yields move inversely to prices.
The Federal Open Market Committee’s two-day policy meeting is scheduled to end at 2 pm Eastern Time, followed by a news conference with Powell.
The Fed will release new economic and interest rate forecasts, which may indicate that Fed officials hope to raise rates by or before 2023. The central bank must recognize stronger growth, which should make policies easy Fed spotlight, especially given the new $ 1.9 trillion in federal stimulus spending.
Ian Shepherdson, chief economist at Pantheon Macroeconomics, told CNBC’s “Squawk Box Europe” on Wednesday morning that he would be “surprised” if the Fed signaled it would interfere in increasing bond yields at these levels.
The 10-year Treasury’s yield has increased rapidly recently amid concerns about potential growth in inflation as economies reopen and recover from the coronavirus pandemic. The 10-year yield has jumped more than half a percent since the end of January, reaching 1.6% in the past few weeks.
However, Shepherdson pointed out that this was “still close to zero in real terms”.
Shepherdson believes that while Powell once again rejects some of the market’s inflation fears, he suggested that the Fed chairman would not talk about reducing his bond buying program at Wednesday’s press conference.
He explained that this is because “as soon as the Fed starts talking about a gradual reduction, yields will skyrocket immediately because that is what the markets do – you give the markets an inch and they take a meter – especially on Treasury bonds at the moment” .
“So the Fed, I think it wants to keep this conversation really hushed up as much as possible, until it can’t,” he added.
Shepherdson pointed out that this lack of indication from the Fed as to when any policy changes could occur was “kind of justified because that recovery is still a forecast”.
Meanwhile, data on the number of building permits authorized and new housing construction projects started in February will be released at 8:30 am ET on Wednesday.
An auction will be held on Wednesday for $ 35 billion in 119-day notes.
– CNBC’s Maggie Fitzgerald contributed to this report.