The US 10-year hits its highest level in 7 years

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  • The US 10-year Treasury yield hit its highest level since July 2011 after solid economic data .
  • The yield spike coincides with the mounting speculation that the Fed may hike interest rates and that US inflation will finally catch up.
  • Watch the US 10-year bond yield here.

The US 10-year yield is up more than 6 basis points Tuesday morning, crossing 3.06% for the first time since July 2011. The spike coincides with better than expected economic data fuelling expectations the Fed could hike rates as much as four times in 2018.

Empire Manufacturing printed 20.1 for May, well ahead of the 15.0 that economists surveyed by Bloomberg were expecting. And advanced retail sales rose 0.3% month-over-month in April, matching economists’ forecasts. The data caused market expectations for four Fed rate hikes in 2018 to tick above 50%, according to Bloomberg’s World Interest Rate Probability data.

Later on Tuesday, two key Fed members, Dallas Fed President Robert Kaplan and San Francisco Fed President John Williams, are scheduled to speak today, presenting an opportunity for commentary on interest rake hikes. Though the Fed has previously said it expects three rate hikes in 2018, expectations are shifting towards a fourth hike.

And now that the 10-year is clearly above the key 3% threshold, economists on Wall Street are looking for it to climb even further.

“A break above 3.00% suggests 3.25%,” Morgan Stanley strategist Matthew Hornbach wrote in a note to clients in late April.

The 10-year yield has climbed more than 65 basis points this year.

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