10-year U.S. Treasury yield moves toward 1.2%

What could rattle markets in 2021, even as vaccines are rolling out

U.S. Treasury yields rose in early trade on Tuesday, extending a bond-market selloff that has sent the benchmark 10-year Treasury yield through key trading levels.

What are Treasurys doing?

The 10-year Treasury note yield

rose 3.1 basis points to 1.165%, while the 2-year note rate

edged 0.4 basis point up to 0.149%. The 30-year bond yield

added 1.4 basis points to 1.892%. Bond prices move in the opposite direction of yields.

The spread between the 2-year note and the 10-year note, a gauge of the yield curve’s slope, widened to 1.02 percentage points.

What’s driving Treasurys?

Much of the recent bearish pressure has come from expectations the incoming administration of President-elect Joe Biden will enact a powerful fiscal agenda, with the support of Democratic lawmakers. That has helped lift forecasts for inflation, which can erode the returns earned from holding government bonds.

Some of the selling was also attributed to a heavy round of supply this week as broker-dealers made room for the new issuance. The Treasury Department will sell $38 billion of benchmark 10-year notes in the afternoon.

In U.S. economic data, a survey showed small businesses were the most pessimistic since the onset of the COVID-19 pandemic.

The Labor Department will later release the results of its Job Openings and Labor Turnover Survey at 10 a.m. ET.

What did market participants say?

The bearish tone in Treasurys was “attributed to global supply and the prospects of Fed tapering sooner than some had anticipated,” said Justin Lederer, an interest-rate strategist at FHN Financial.

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