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10-year government bond yield hits new 13-month high of 1.67% ahead of Fed decision

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The Treasury Department’s 10-year yield was 1.67% early Wednesday, hitting a new 13-month high following a press conference with Federal Reserve Chairman Jerome Powell after the central bank’s two-day meeting.

The benchmark 10 year Treasury note yield increased 8 basis points by 4 basis points to 1.671%. The yield on the 30-year government bond rose by around 1 basis point to 2.421%. The yields move inversely to the prices (1 basis point corresponds to 0.01%).

The 10-year intraday high reached 1.676%, its highest level since February 6, 2020. The 30-year intraday high of 2.428% was the highest since November 12, 2019.

Wednesday’s early move in the decade surpassed its recent high on Friday of 1.642%, reaching levels not seen since early February 2020 when the pandemic began to hit the markets. The 30-year-old also hit its highest level since the beginning of last year.

The two-day meeting of the Federal Open Market Committee ends at 2 p.m. (CET), followed by a press conference with Powell.

The Fed will release new economic and interest rate projections that could suggest that Fed officials expect a rate hike by or even before 2023. The central bank is expected to recognize stronger growth, which should particularly focus on the Fed’s loose policy given the new $ 1.9 trillion in federal stimulus spending.

Ian Shepherdson, chief economist at Pantheon Macroeconomics, told CNBC’s Squawk Box Europe on Wednesday morning that he would be “amazed” if the Fed signals that it will step in to curb soaring bond yields at these levels.

10-year government bond yields have risen rapidly recently on concerns about possible inflation growth as economies reopen and recover from the coronavirus pandemic. The 10 year return started the year at 0.9%.

Shepherdson stressed, however, that this was “still close to zero in real terms”.

Shepherdson believed that while Powell would ease some of the market’s inflation fears again, he suggested that the Fed chair not speak in Wednesday’s news conference about curtailing his bond-buying program.

He said this is because “as soon as the Fed talks about a rejuvenation, yields will skyrocket immediately because the markets do – they give the markets an inch and they take a court – especially on government bonds right now. “

“I think the Fed wants to dampen this conversation as much as possible until they can’t,” he added.

Shepherdson pointed out that this lack of guidance from the Fed as to when policy changes might occur is “somehow justified because that recovery is still a forecast”.

The data on the number of approved building permits and new housing projects started in February will be published on Wednesday at 8:30 a.m.CET.

An auction for 119-day bills valued at $ 35 billion will take place on Wednesday.

– CNBC’s Maggie Fitzgerald contributed to this report.

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Katherine Clark