The yield on the 10-year U.S. Treasury note broke though 3% for the first time in three months today.
At one point, it got as high as 3.02%. Bloomberg reports this is the highest level since July 26,2011.
The 10-year yield began to rally in May, which was when Federal Reserve Chairman Ben Bernanke hinted that the Fed could soon begin to taper its large-scale asset purchase program (LSAP). Also known as quantitative easing, the LSAP consisted of the monthly purchases of $US85 billion worth of Treasury and mortgage securities.
Tapering is considered the first step on the long path of unwinding the Fed’s ultra-easy monetary policy, a process that would mean higher, more normal interest rates.
Earlier this month, the Fed finally announced it was initiating the tapering right away.
And today, we are seeing the U.S. government’s long-term cost of borrowing rise to the highest level in years.