Bond Report: U.S. government bond yields rise to nearly 1-year high to kick off week

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U.S. 10-year Treasury rates on Monday rose, and prices fell, to around the highest level in nearly a year as investors focused on progress toward another large round of fiscal aid to help combat the harmful economic effects of COVID-19.

How are Treasurys performing?
  • The 10-year Treasury note yield TMUBMUSD10Y, 1.191% was at 1.180%, picking up 1.2 basis points, after finishing last week at its highest level since last March on Friday.
  • The 2-year Treasury note rate TMUBMUSD02Y, 0.109% was at 0.105%, trading virtually unchanged.
  • The 30-year bond yield TMUBMUSD30Y, 1.974% was at 1.971%, up 0.2 basis point, nearing the key 2% level that has capped the long-dated maturity since last February.

Bond yields rise as prices fall.

What’s driving government debt?

Yields for government bonds rose as investors anticipated that the U.S. government will be inspired to spend more money to help stem economic deterioration from the spread of the coronavirus that causes COVID-19.

Friday’s weaker-than-expected January jobs report also was seen enhancing prospects for greater spending, after the U.S. regained a meager 49,000 jobs in January as many states reimposed business restrictions to combat the pandemic and restaurants and hotels had to lay off workers.

So far, Democrats have taken steps that would allow the Senate to vote on President Joe Biden’s relief plan without Republican support in the Senate.

Read: Individual investors are back — here’s what it means for the stock market

On top of that, Treasury Secretary Janet Yellen on Sunday said Biden’s plan could fuel strong enough growth to return the U.S. to full employment by next year.

What are analysts saying?

“The re-inflation trade continues pushing rates higher and steeper this morning,” wrote Jim Vogel, a rates strategist at FHN Financial, in a Monday research note.

“Relative to stimulus headlines driving the move, higher real interest rates would align better with the implied fundamentals than inflation,” the analyst said.

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