Sharp Rise in US Treasury Yields Amid Early Tightening Concerns... Highest in 2 Years

[Asia Economy New York=Special Correspondent Joselgina] Concerns are spreading that the U.S. Federal Reserve (Fed) will accelerate early tightening, pushing U.S. Treasury yields to their highest levels in two years.

On the 18th (local time) in the New York bond market, the yield on the U.S. 10-year Treasury note traded at 1.847%, marking the highest level since January 2020.

The 2-year yield, which is sensitive to monetary policy, also entered the 1% range for the first time since February 2020, just before the COVID-19 pandemic. The 2-year yield moved around 1.026% on the day. The yield spread between the 2-year and 10-year notes narrowed to around 80 basis points (1bp=0.01 percentage points).

This sharp rise in U.S. Treasury yields came amid growing expectations that the Fed may speed up its tightening policy beyond initial forecasts to combat inflation. The market anticipates the first rate hike to occur in March.

The Wall Street Journal (WSJ) reported, "Investors' confidence is growing that the Fed will implement four rate hikes this year instead of the initially expected three," adding, "The key issue is how much and how quickly the Fed will act to tame inflation."

Investors also monitored financial sector earnings alongside the surge in U.S. Treasury yields. However, the disclosed financial earnings fell short of stimulating investor sentiment. Goldman Sachs reported earnings per share (EPS) of $10.81, below the previous year. Another financial firm, Charles Schwab, also missed market expectations with an EPS of $0.86.

On the morning of the same day at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average (-1.36%), S&P 500 (-1.48%), and Nasdaq (-1.85%) all showed declines.

International oil prices rose amid growing concerns over geopolitical tensions in the Middle East. At the same time, on the New York Mercantile Exchange (NYMEX), the February West Texas Intermediate (WTI) crude oil price traded around $85 per barrel, up 1.4% from the previous session.