US Yields Surge Towards Multi-Decade Peaks Amid Strong Economy

U.S. Treasury yields have reversed their recent decline and are rising towards multi-decade highs, erasing global bond market relief seen earlier this month.

The 10-year Treasury yield has risen to approximately 4.5%, up from a low of 4.2% in mid-February, driven by strong economic data and reduced expectations of aggressive Federal Reserve rate cuts.

Investors are pricing in a more patient Fed, with the CME FedWatch tool showing a 65% probability of no rate change at the March meeting, up from 50% a month ago. This shift in expectations has pushed yields higher across the curve, with the 2-year yield rising to 4.2% and the 30-year yield reaching 4.7%, both near their highest levels since 2023.

The U.S. yield rebound is exerting upward pressure on bond yields worldwide, particularly in developed markets. The German 10-year Bund yield has climbed to 2.4%, while the UK's 10-year Gilt yield has risen to 4.1%.