This week, long Treasury Bond yields reached their highest level in months. Today, the 30-yr T reached 4.915%, the highest level in just over a year and a 59-basis-point change since the close on December 6th.
This is also a busy week for bond sales. The Treasury sold $58B 3-yr notes Monday and will sell $39B 10-yr and $22B 30-yr bonds today and Wednesday. The market will be closed on Thursday due to the National Day of Mourning for Ex-President Carter, thus the accelerated auction schedule.
Tariffs, tax cuts, the rising debt, and SS benefit changes have intensified concerns as we approach a new administration. The potential for inflation to be problematic under these circumstances is a significant risk. Various economists have voiced that we could top 5% on the 10-yr and the 30-yr in the coming months, making results in this week’s auctions very important. According to BMO’s Chief Investment Strategist, Brian Belski, the average yield of the 10-year Treasury over the last 75 years has been 5%.
While these factors weigh heavily on investors, the increase in yields is advantageous for new bond buyers and those wanting to average bond yield returns. On the reverse side, the current positive market commentary by economists is based on the firm belief that inflation will get under control and rates will decrease; it will just take longer than expected.
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