10-year Treasury yield pulls back from 14-month high

  • The 10-year yield topped 1.7% on Thursday, a 14-month high, while the 30-year yield briefly jumped above 2.5%.
  • Gary Pzegeo, head of fixed income at CIBC Private Wealth, said investor reaction to the Fed's comments "indicate that markets either see longer-term risks to inflation, or near-term risks of the Fed wavering from this new approach."

The 10-year U.S. Treasury yield retreated on Friday morning, having spiked to a 14-month high in the previous session, but remained above 1.68%.

The yield on the benchmark 10-year Treasury note dipped about 3 basis points to 1.69% at 6:30 a.m. ET. The yield on the 30-year Treasury bond fell 4 basis points to 2.429%. Yields move inversely to prices (1 basis point equals 0.01%).

Treasurys

The 10-year yield topped 1.7% on Thursday, a 14-month high, while the 30-year yield briefly jumped above 2.5%. The sharp rise in yields followed comments from the Federal Reserve and its Chairman Jerome Powell, indicating that the central bank would allow inflation to run hotter.

The 10-year yield began the year under 1%.

The Fed said it expected core inflation to hit 2.2% in 2021, but forecast it to be around 2% in the long run. Powell suggested the Fed was willing to let inflation tick higher if it helped improve the employment picture in the U.S.

Gary Pzegeo, head of fixed income at CIBC Private Wealth, pointed out on Thursday how this was part of the Fed's newer policy framework, announced last summer, that "introduced a more inflation tolerant Fed intent on achieving full employment before tightening policy."

"Reactions indicate that markets either see longer-term risks to inflation, or near-term risks of the Fed wavering from this new approach," he said. 

Mobeen Tahir, associate director of research at WisdomTree, told CNBC's "Squawk Box Europe" on Friday that it was important to put the rise in Treasury yields in perspective.

"We're talking about yields rising from levels so low that a year ago it would have been inconceivable that U.S. Treasury yields can actually go so low, but alas, equity markets don't like yields rising very quickly and hence we've seen these jitters across the board," he said.

There are no auctions scheduled to be held on Friday.

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