When Treasuries catch Korea's volatility bug, take cover
TLT•The 10-year Treasury yield reached 5.2251%, a 19-year high, while the 30-year yield rose to 5.5016%, its highest since 2004. The moves came as futures priced a 70% chance of another Federal Reserve rate hike next month.
1. Treasury yields surge
The benchmark U.S. 10-year yield rose nearly 20 basis points in two sessions, reaching 5.2251% overnight. The 30-year yield jumped 16 basis points to 5.5016%, its highest since 2004. A Treasury buyback scheduled for $6 billion managed just $4 billion.
2. Global market effects
The sell-off spilled into Asia, where Japan’s government yields reached levels not seen since 1996 and Australia’s 10-year yields approached a 15-year high. Futures priced a 70% chance of a follow-up Federal Reserve rate hike next month and as much as 90 basis points of tightening in this cycle. Norway’s central bank surprised with a rate hike, while Sweden’s central bank signalled it was likely to follow by year-end.
