U.S. Treasury yields slumped on Monday morning, as investors digested signals that more aggressive interest rate hikes are on the horizon.
The yield on the benchmark 10-year Treasury note dropped 8 basis points at 3:45 a.m. ET. The yield on the 30-year Treasury bond moved 5 basis points lower. Yields move inversely to prices and 1 basis point is equal to 0.01%.
Treasurys
Treasury yields moved sharply lower on Monday morning, after having spiked at the end of last week, on the back of comments made by Federal Reserve Chairman Jerome Powell.
Powell said on Thursday that a 50-basis-point interest rate hike was “on the table” for the Fed May policy meeting.
The 5-year Treasury yield then topped 3% on Friday, surging above the interest rate on the 30-year government bond. This is also known as a “yield curve inversion” and indicates a lack of investor confidence about the economy, given they are selling out of shorter-dated debt in favor of long-dated bonds.
The 5-year yield slid 10 basis points to 2.8486% on Monday morning.
There are no major economic data releases due out on Monday. Investor focus this week will likely be on the March personal consumption expenditures price index, as a key measure of inflation, which is slated to come out on Friday morning.
Julian Howard, head of multi-asset solutions at GAM, told CNBC’s “Squawk Box Europe” on Monday that he believes that talk of a 75-basis-point interest rate hike by some policymakers, in an attempt to control inflation, was “totally the wrong policy and is actually going to damage the economy.”
He pointed out that the so-called “misery index,” which looks at unemployment and inflation, was currently at “recessionary levels.”
“Do we really want a recession in order to defeat inflation? I think that’s almost verging on policy error,” Howard said.
Investors continue to monitor developments in Ukraine as Russia’s invasion of the country entered its third month on Sunday. The conflict that has killed thousands and led to the worst refugee crisis Europe has seen since World War II.
The war will end only if Russian troops fully withdraw from the country, Ukrainian Prime Minister Denys Shmyhal said.
— CNBC.com staff contributed to this market report.
