Treasury yields rise as central banks around the world get more aggressive in fighting inflation

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U.S. Treasury yields rose Thursday, as traders weighed the latest policy moves taken by central banks around the world — including the Federal Reserve — to curb global inflationary pressures.

The yield on the benchmark 10-year Treasury note traded 4 basis points higher at 3.44%. The yield on the 30-year Treasury bond climbed more than 3 basis points to 3.446%. Yields move inversely to prices.

The 2-year Treasury rate, which is more sensitive to U.S. monetary policy changes, jumped 9 basis points to 3.372%. Yields move inversely to prices, and 1 basis point equals 0.01 percentage point.

Thursday’s moves came after the Swiss National Bank overnight raised rates for the first time in 15 years. The Bank of England was set on Thursday to raise rates for the fifth straight time.

On Wednesday, the Fed raised rates by 75 basis points (0.75 percentage point), marking is biggest rate hike since 1994.

The central bank’s aggressive move to rein in inflation came after the U.S. consumer price index rose by an annual 8.6% in May, its largest year-on-year increase since 1981.

Members of the Federal Open Market Committee reiterated the Fed’s commitment to stabilizing inflation and indicated that a stronger path of rate increases lies ahead. Officials also cut their 2022 economic growth outlook to just 1.7% from 2.8%.

Analysts were divided as to the market implications and the scale of the likely recession coming down the pike.

“Recognizing that hiking more now means less later, the Fed demonstrated its resolve to tame inflation without undermining its employment mandate,” said Ronald Temple, co-head of multi-asset and head of U.S. equity at Lazard Asset Management.

“While some spectators argued for an even steeper hike, the Fed understood that the combination of rate hikes and QT already takes the US into uncharted territory with significant risks to growth. The hike today sent exactly the right message to markets.”

Data releases on Thursday will include May’s housing starts and building permits, along with last week’s jobless claims figures.

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