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Fixed Income
March 3, 2021
3 mins

US Treasury yields re-price higher on improving economy

March 3, 2021
3 mins
Bruce Harris
Global Head of Fixed Income Strategy
Close up of engineer inspecting low pressure turbine during inspection in turbine maintenance factory

The recent rise in yields has left fixed income investors nursing losses. The good news, though is that this re-pricing is making corporate bond yields more attractive, says Global Head of Fixed Income Strategy Bruce Harris.

  • As discussed in our recent communications (CIO Strategy Bulletin: Beware the Cash Thief and Fixed Income Strategy Bulletin: Bond Investors Confront Inflation Risk With Valuations Still High), US Treasury (UST) rates were expected to continue weakening throughout 2021 as the likelihood of a fiscal mega-stimulus being deployed increases and the economy re-opens.  Yesterday however, US Treasuries yields violently re-priced higher across the curve into our expected 2021 range, with the closely watched 10y Treasury jumping almost ~25bps intra-day to a high of 1.55% before settling back to around 1.50%. Bond volatility also spiked to the highest levels since last March, as rates are catching up to this strong growth reality.  
  • The more extreme move in Treasury yields however occurred at the shorter end of the curve around the 5y point, which experienced a ~20bps move higher. This move was in part likely a response to the futures markets moving the start date of the Fed rate hikes forward, combined with a very poor 7yr UST bond auction result.
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