Rout in 10-Year Treasury Notes Is No Wild Aberration
History suggests that the surge in yields is probably just a detour. But that doesn’t mean it won’t hurt.
The selloff in 10-year Treasuries could be transitory.
Photographer: Saul Loeb/AFP/Getty Images
The rout in 10-year Treasury notes has pushed yields to the highest since 2007, with the latest bump above 4.89% coming on the heels of a strong US jobs report on Friday. What everyone wants to know now is how much further the selloff will go and how long it will last. I can venture a few educated guesses based on history.
Looking at past periods of monetary policy tightening, my main observation is that the 10-year yield tends to max out at — or slightly above — the Federal Reserve’s peak policy rate. This stands to reason because investors traditionally demand a premium for the inherent uncertainty associated with holding longer-term bonds.