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10-year yield continues rapid climb, hits the highest since June

The benchmark 10-year U.S. Treasury yield rose again on Tuesday morning, trading at its highest levels since June and continuing a steady increase that began last week.

The yield on the benchmark 10-year Treasury note was up 5.3 basis points to 1.537% at a7:30.m. ET after trading above 1.54% overnight. The yield on the 30-year Treasury bond added 6.3 basis points, spiking to 2.058%. Yields move inversely to prices and 1 basis point is equal to 0.01%.

Federal Reserve Chairman Jerome Powell, in prepared remarks to be delivered on Tuesday, warned that higher inflation may last longer than anticipated.

Powell is due to deliver the remarks to the Senate Banking Committee at 10 a.m. ET on Tuesday. In the prepared speech, he said that economic growth has “continued to strengthen” but has been met with upward price pressures caused by supply chain bottlenecks and other factors.

“Inflation is elevated and will likely remain so in coming months before moderating,” Powell said.

Last week, the Fed indicated that it may soon begin pulling back its asset purchases. The central bank’s updated economic projections also showed that half of the major Fed officials now see a rate hike in 2022.

The updates from the central bank appear to have sparked a rise in yields across the time curve. The 10-year yield’s rise comes after the bonds traded at 1.30% at the end of August. The 30-year Treasury is trading at its highest yield since early July, while the 5-year yield is at its highest level since early 2020, before the Covid pandemic hit the United States.

The 10-year is now trading at a key level that could prove to be an inflection point for an even bigger move, according to Tom Essaye of the Sevens Report.

“Focus now turns towards the all-important mid-1.50% range, which is the trendline from the highs in the 10-year yield from back in late March. If economic and inflation data is solid this week, and the 10-year yield can breakthrough the mid-1.50% range and close near (or above) 1.60% this week, investors will look for a continuation of the rise in yields back to that March high of 1.74%,” Essaye said in a note to clients on Tuesday morning.

Fed Governor Michelle Bowman is due to speak at the 2021 Community Banking in the 21st Century Research and Policy Conference at 1:40 p.m. ET on Tuesday.

On the data front, the July S&P/Case-Shiller home price index is expected to be released at 9 a.m. ET.

The September CB consumer confidence index is then due out at 10 a.m. ET.

In addition, investors will continue to monitor the progress of the $1 trillion infrastructure bill in Washington. Lawmakers must act on a funding plan before the government faces a shutdown Friday.

An auction is scheduled to be held on Tuesday for $62 billion worth of seven-year bills.

CNBC’s Jeff Cox and Maggie Fitzgerald contributed to this market report.

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