Treasury Yields Soar as Fed Signals Further Rate Hikes Ahead

The US Treasury yield has continued to rise, holding near its highest level since June 2007 at 5.17%. The 30-year Treasury yield was flat at 5.463%, while the 2-year note yield remained steady at 4.899%.

This move follows a sharp increase in yields on Thursday, when the 10-year yield jumped over 10 basis points to as high as 5.223%. The 30-year Treasury yield also touched 5.501%, its highest since June 2004.

Federal Reserve Governor Michael Barr said that additional rate increases will likely be needed to bring inflation back down to the Fed's 2% target. He stated, 'In my base case, further policy adjustments are likely to be needed to ensure inflation comes down to target in a timely fashion.'

The bond market has been under pressure due to high oil prices and strong economic readings, including S&P Global's flash PMI data showing US private-sector activity expanding at its fastest pace in over five years.

ING's regional head of research for the Americas, Padhraic Garvey, and senior rates strategist Benjamin Schroeder noted that markets have likely already priced in most near-term rate hike risk. However, they cautioned that yields remain vulnerable on a separate basis due to government bond yields being under pressure from a debt dynamic theory.