The benchmark U.S. 10-year Treasury yields surged on Friday resulting in a sell-off across the global markets. The U.S. Treasuries became a focal point for global markets after traders aggressively moved to price in earlier monetary tightening than signalled by the U.S. Federal Reserve and peers, due to a combination of improving prospects for economic recovery and concerns over rising inflation, as per a Reuters report.
Jan Lambregts, Global Head of Financial Markets Research at Rabobank said, “It is real yields at the moment pushing things. If you look at inflation expectations, and you look at most of last year all the way to January 4, the cost-push pressures were mainly behind any inflation expectations we saw, any recovery in that. That has changed from January 5 onwards when we have seem more demand-pull factor coming through meaning that people are thinking there is a brightening outlook for real demand and that is having an impact.”
According to Lambregts, yields will be lower towards the end of the year.
“Longer-term or towards the end of this year we still see very low yields. We think we will actually come off from current levels simply because there is so much slack in for example labour markets but also other markets still present. COVID has really wrecked a lot of havoc and it won’t be easy to polish that away,” he said.
He also said that the Fed hasn’t explicitly said that they will control the yield curve. He added that it will be interesting to see how far the Fed will be pushed.Watch video for a more in-depth analysis