Treasury yields rose on Thursday, erasing their losses from the previous session that were sparked by Fed Chair Jerome Powell signaling that the central bank would not take more aggressive hikes at upcoming meetings.
The yield on the benchmark 10-year Treasury note rose more than 17 basis points to 3.09% at roughly 11:15 a.m. ET, hitting its highest level since 2018. The yield on the 30-year Treasury bond rose 17 basis point to 3.176%. Yields move inversely to prices and 1 basis point is equal to 0.01%.
The Fed announced it was raising its benchmark interest rate by half a percentage point on Wednesday afternoon, which marked its largest single hike since 2000, but was in line with market expectations.
The U.S. central bank also outlined its plans to start reducing its balance sheet in June.
However, Fed Chairman Jerome Powell said a 75-basis-point hike was not something the Federal Open Market Committee was “actively considering.” That saw the 10-year yield fall on Wednesday afternoon.
Freddie Lait, founder and CEO at Latitude Investment Management, told CNBC’s “Squawk Box Europe” on Thursday that the relief rally in markets was understandable, given the concerns that a 75-basis-point rate hike could have been in the cards, especially considering recent comments from the likes of St. Louis Fed President James Bullard.
Nevertheless, Lait said the Fed was still going to continue on its hawkish path of raising rates, in order to return them to around the 3% level in the next six or seven months.
Lait said he therefore thinks that “trend is still in play and it’s likely we see a continuation of the moves that we’ve seen year-to-date from here.”
The 10-year Treasury yield hit 3% on Monday and again on Wednesday morning in the lead-up to the meeting, amid concerns that rising inflation and the Fed’s more aggressive hiking of interest rates could slow economic growth.
“We believe that the Fed’s hawkish stance is largely priced into the stock and bond markets,” said Jay Hatfield of Infrastructure Capital Management. “We expect the 10 -year treasury to start to top out in the 3% area as global pension investors with $52 trillion of assets reallocate to almost risk-free treasuries. … The Chairman’s press conference was very positive as Chair Powell ruled out a 75bp increase and indicated only two meetings are expected to have 50bp increases and then they would reassess.”
The benchmark 10-year rate has since softened but remains high, with investors monitoring key pieces of economic data.
On Thursday, weekly jobless claim numbers came in slightly higher than expected. A labor productivity reading for the first quarter showed the fastest decline since 1947.
Regarding the Russia-Ukraine war, Pentagon spokesman John Kirby said the Russians have made uneven progress in the Donbas region, following weeks of resupply and repositioning efforts. Nonetheless, the U.S. and its allies are rushing to send additional security assistance amid an intensified Russian assault in eastern and southern Ukraine.
— CNBC’s Holly Ellyatt contributed to this market report.