Source: Wall Street

A sell-off has pushed Treasury yields close to their March highs.

Bond yields have been rising sharply since the Fed's policy meeting on September 21-22. On Friday, the disappointing September non-farm payrolls report briefly stopped the climb.

But the yield on the 10-year Treasury note closed at 1.615%.It is the highest level since June.

The Fed strongly hinted at its FOMC meeting in September that it could start scaling back its bond purchases as early as November. Officials also say they could raise short-term interest rates above their current near-zero level as soon as next year.

In the weeks that followed, investors began to sell all types of government bonds. This triggered market turmoil, including a rise in the dollar and a fall in technology stocks.

Yields on short-term bonds have risen, which are particularly sensitive to the outlook for interest rates set by the Federal ReserveBut long-term bond yields have also risen, which could be a sign that markets expect rates to rise even after the Fed starts raising rates for the first time.

People on Wall Street have been waiting for a rise in yields for a long time, and they thought yields were lower than they should have been throughout the summer.

But analysts believeAs trading activity increases and the Fed slowly begins to scale back its $120 billion-a-month bond-buying program, those purchases are bound to end in the autumn.

Analysts point out that there are other factors contributing to the sell-off: the decline in the case of COVID-19 has revived hopes that more employees may soon return to the office, boosting the economy.

According to the Wall Street Journal, Larry Milstein, head of government and institutional trading at R.W. Pressprich & Co, believes thatThe prospect of scaling back bond purchases is an important reason for the rise in Treasury yields, as well as inflation expectations.

Congress reached an agreement to extend the US debt ceiling to December, eliminating a short-term economic threat. At the same time, persistent supply shortages, rising energy prices and strong consumer spending have pushed up inflation expectations.

Many investors and analysts believeTreasury yields still have room to rise from their current levels.

for quite some time,Some market participants have been predicting that the yield on 10-year treasury bonds will reach 2% by the end of the year.Although the yield fell to a low of 1.173 per cent in August, they stuck to that forecast.

However, there are warnings that investors may have underestimated future economic risks, including the drag on growth from rising energy costs and supply constraints.

Jim Vogel, interest rate strategist at FHN Financial, wrote in a report:

Looking at the trends of the past two months, perhaps the market's view of 2022 is reasonable.

Looking forward to the next four months, the possibility of a sustained recovery of US GDP has begun to shrink.

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