The 10-year yield of the US Treasury exceeded 1.64% at the beginning of Wednesday, reaching a new maximum of 13 months, before a press conference with the President of the Federal Reserve, Jerome Powell, after the political meeting of the central bank.
The yield on the 10-year treasury bill rose to 1.644% at 6 a.m. ET. The yield on the 30-year treasury bond rose to 2.395%. Yields move in the opposite direction to prices.
The political meeting of the Federal Open Market Committee will end at 14:00 ET, followed by a press conference with Powell.
The Fed will release new economic and interest rate forecasts, which could indicate that Fed officials expect rates to rise by, or even before, 2023. The central bank is expected to recognize stronger growth, which should focuses on the Fed’s light policies given the new $ 1.9 trillion federal stimulus spending.
Ian Shepherdson, chief economist at Pantheon Macroeconomics, told CNBC’s “Squawk Box Europe” on Wednesday morning that he would be “amazed” if the Fed signs that it will step up to reduce bond yields at these levels.
The 10-year treasury yield has risen rapidly recently amid concerns about the potential rise in inflation as economies reopen and recover from the coronavirus pandemic. The 10-year yield has risen by more than half a percent since the end of January, reaching 1.6% in the past two weeks.
However, Shepherdson stressed that it was “still close to zero in real terms.”
Shepherdson believed that while Powell would push back some fears of market inflation, he suggested the Fed president would not talk about cutting his bond-buying program at Wednesday’s news conference.
He explained that this is because “as soon as the Fed starts talking about the cut, then yields will immediately skyrocket because that’s what markets do – you give markets an inch and they take a yard – especially in current treasuries.”
“Therefore, I think the Fed wants to keep this discussion really diminished as much as it can until it can’t,” he added.
Shepherdson stressed that this lack of guidance from the Fed on when any policy changes could occur was “somewhat justifiable, as this recovery is still a forecast.”
Meanwhile, data on the number of licensed building permits and new housing construction projects started in February will be released on Wednesday at 8:30 AM ET.
An auction for $ 35 billion in 119-day bills will take place on Wednesday.
– CNG’s Maggie Fitzgerald contributed to the report.