TREASURIES-Treasury yields hover near 2-1/2 month highs

BY Reuters | ECONOMIC | 09/24/21 04:29 AM EDT

LONDON, Sept 24 (Reuters) - Benchmark 10-year U.S. Treasury yields edged up on Friday to hover near their highest levels in over 2-1/2 months in a sign of investor unease that major central banks are moving towards tightening monetary policy.

In early London trade, 10-year Treasury yields were up 2 basis points at around 1.43%, having hit a fresh high at 1.45%.

The moves were modest in contrast to Europe, where German, Italian and British yields all hit new highs a day after hawkish signals from central bankers .

The U.S. Federal Reserve on Wednesday said it would reduce its monthly bond purchases "soon", and half of the Fed's policymakers projected borrowing costs will need to rise in 2022.

U.S. 10-year bond yields are up around 6 bps this week and set for their biggest weekly jump in four weeks.

"I was surprised to see a modest reaction after the Fed, but now markets have had time to digest the news the overall moves have been sizeable, and there have been other things happening," said Jan von Gerich, chief analyst at Nordea, referring to action from other major central banks on Thursday.

"Central bankers have been talking in unison about inflation being transitory but if even the Fed is softening its stance on this, then that could also be the case elsewhere." (Reporting by Dhara Ranasinghe; Editing by Jan Harvey)

In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

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