TREASURIES-U.S. 10-yr yield rises toward 1.5% level last seen in June

BY Reuters | ECONOMIC | 09/27/21 07:04 AM EDT

U.S. Treasury yields resumed their march higher on Monday, with 10-year yields hitting their highest level in three months as concerns that the Federal Reserve is shifting towards a more hawkish policy continued to unnerve bond markets.

In European trade, the 10-year Treasury yield rose to as high as 1.497% and were last up almost three basis points on the day.

They rose almost 9 bps last week, their fifth week of gains and the biggest weekly jump since March, as investors reacted to a more hawkish-than-anticipated shift by major central banks including the U.S. Federal Reserve and the Bank of England.

Across the curve, most other Treasury yields were 2-3 bps higher on the day on Monday with 30-year yields rising above 2% for the first time since mid-August.

Analysts said the continued selloff in bond markets was likely also driven by position adjustments and a reassessment of the inflation outlook given signs that price pressures could prove stickier than anticipated.

"We had the hawkish communication from the Fed and BoE last week and there's also a reappraisal of the outlook and a recognition that the expectation for stable rates was wrong," said ING senior rates strategist Antoine Bouvet. (Reporting by Dhara Ranasinghe; editing by Sujata Rao)

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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