Treasury yields rise as investors bet on higher interest rates

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The 10-year US Treasury yield came in at 1.9% on Wednesday morning, the highest level since December 2019.

The yield on the benchmark 10-year Treasury rose 2 basis points to 1.8916% at 4 AM ET. The yield on the 30-year Treasury rose one basis point to 2.2036%. Returns move inversely with prices and one basis point is 0.01%.

The 10-year interest rate rose on Tuesday, surpassing 1.87%, amid growing investor expectations that the Federal Reserve may soon start raising interest rates.

The two-year Treasury yield, which reflects expectations of short-term interest rates, also rose 1% for the first time in two years. It remained higher on Wednesday morning, hovering above 1.06%.

In a note on Tuesday, the BlackRock Investment Institute’s team of strategists, headed by Jean Boivin, argued that the expected timing of the rate hike did not cause a jump in yields.

Analysts explained that “the overall expected rate hikes remain low, thanks to the Fed’s historically muted response to inflation.”

In fact, they said, the sudden rise in the 10-year yield “tells us that investors are less willing to pay a safety premium to bonds and is not bad news for stocks per se.”

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Additionally, the German 10-year bond yield traded in positive territory for the first time in nearly three years on Wednesday morning.

The European Central Bank is currently lagging the normalization path, compared to the Federal Reserve and the Bank of England, but rising inflation and broader moves in the global bond market have now helped push yields above zero.

On the US data front, the number of home building projects has begun, and permits are due in December at 8:30 a.m. ET on Wednesday.

Auctions are scheduled for Wednesday for $40 billion in 119-day notes and $20 billion in 20-year notes.

CNBC’s Matt Clinch contributed to this market report.

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