Treasury Bond Rates Are About To Hit Stiff Resistance (TLT)

Treasury Bond Rates Are About To Hit Stiff Resistance (TLT)

The rate with which treasury yields have moved higher has caught many off guard and may be part of the recent uptick in market volatility.

The yield on the benchmark 10-year Treasuries jumped 5 basis points to 2.88 percent, the super-long 30-year bond yields surged 4 basis points to 3.17 percent and the yield on the short-term 2-year traded almost 5-1/2 basis points higher at 2.11 percent by 11:15GMT.

USA consumer prices rose 2.1 percent year-on-year in December and are forecast to stay around that pace this month. Traders are expecting the Consumer Price Index for January data coming Wednesday to validate fears that inflation is ramping up.

The jump in wage inflation pushed yields on the benchmark 10-year U.S. Treasury note US10YT=RR closer to the 3.0 percent mark last seen four years ago, denting the attractiveness of equities and unnerving investors fearful inflation will force the U.S. Federal Reserve to raise short-term interest rates at a faster pace than is now priced into the market.

"So, by relative comparison, you're sort of trapped into equities even though you know they are not good value", he added. "With interest rates going up, because the economy is strong and inflation is picking up, government bonds have become not the safest asset class in the planet but toxic waste", he said.

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