US 10-year bond yields briefly touched the 3% threshold at midday on Monday for the first time since late 2018 in anticipation of monetary tightening from the US Central Bank (Fed).
Around 5:15 p.m. GMT, rates on ten-year Treasury bills reached 3.003%, a peak since the end of November 2018. They fell back to 2.97% in the second part of the session.
In a feverish market, investors were positioning themselves ahead of Wednesday’s Federal Reserve policy meeting, awaiting further signals on the pace of monetary tightening.
Some 99% of investors foresee a rise in key rates by half a percentage point (0.50) to fix them between 0.75% and 1%.
It would be the first time in more than 20 years that the Fed would operate a tightening of this magnitude.
Markets are pricing in a series of currency hikes this year that will push overnight rates up to 3% by 2023 to tame inflation.
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This, boosted by energy prices, was 8.5% over one year in March in the United States, according to the CPI index or 6.6% according to the PCE index, preferred by the Fed. In both cases, a 40-year high.
Faced with these expectations, investors are selling treasury bills to protect themselves against inflation and rising interest rates, which erode their value. As bond prices fall, their yields rise.