Treasury Yields Are Set for a Fresh Multi-year High

On Monday morning, the trajectory of ten- and 30-year Treasury yields pointed toward attaining new multi-year highs, marking a notable development as market participants await Federal Reserve Chairman Jerome Powell's upcoming address at the Jackson Hole symposium at the end of the week.

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Current Market DynamicsThe yield on the 2-year Treasury (BX:TMUBMUSD02Y) exhibited an increase of 4.5 basis points, reaching 4.979% from its previous level of 4.934% on Friday. Yields, which exhibit an inverse relationship with prices, demonstrated this upward movement.The yield associated with the 10-year Treasury (BX:TMUBMUSD10Y) observed a surge of 6.9 basis points, settling at 4.320% from its previous value of 4.251% recorded Friday afternoon. This rate was en route to achieving its highest closing point since November 7, 2007, when it concluded at 4.328%.The 30-year Treasury yield (BX:TMUBMUSD30Y) experienced an increase of 6.8 basis points, reaching 4.447% from its previous reading of 4.379% late on Friday. This upward trajectory positioned the 30-year rate to attain its most elevated level since April 27, 2011, when it attained 4.462%.

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Market DriversDespite the prevailing perception that the U.S. central bank is nearing the culmination of its rate-hiking campaign and the eventual attainment of its designated terminal interest rate, the trend of escalating yields persisted on Monday.

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Market participants eagerly anticipate insights into potential shifts in the perspectives of Federal Reserve officials, which are expected to be outlined in Chairman Powell's forthcoming speech at the annual Jackson Hole symposium.

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In the interim, market dynamics indicate an 88.5% likelihood that the Federal Reserve will uphold the current interest rates within a range of 5.25%-5.5% on September 20, as per the CME FedWatch Tool. Furthermore, there is a 35.5% probability attributed to a 25-basis-point rate increase, bringing the range to 5.5%-5.75%, during the subsequent meeting in November.

The present day lacks significant releases of major economic data.

Expert AnalysisBMO Capital Markets rates strategists, Ian Lyngen and Ben Jeffery, highlighted the prevailing scenario, stating, "It's a mid-August Monday and all that implies — specifically, a limited willingness to fight the backup in yields despite investors' widely held assumption that terminal has already arrived."

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In their analysis, they noted that the consensus among experts regarding the upcoming Jackson Hole conference on Friday suggests it will likely constitute a non-event. They further mentioned, "This isn't to suggest that pockets of investors aren't positioning for something more dramatic, even if it is a low-probability event that Powell will use the forum for anything more than reinforcing the messaging that it's too soon to claim victory on the inflation front and the real economy appears to be absorbing higher policy rates with ease. For now."

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