U.S. 10-Year Yield Nears Threshold That Could Propel It Past 2%
- Signs suggest a breach of 1.95% would unleash more selling
- Mortgage-bond investors tend to shed duration as yields rise
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The U.S. 10-year note’s yield, approaching 2% for the first time since August 2019, stands to reach it with a boost from mortgage-bond investors.
The Treasury market selloff that’s lifted the 10-year yield by nearly half a percentage point this year -- to a high of 1.938% on Monday -- is likely to shift into higher gear once the yield reaches 1.95%, strategists say. At that level, mortgage-bond investors would be induced to protect their portfolios against the effects of rising yields by selling Treasuries or doing the equivalent in interest-rate swaps, termed convexity hedging.