US Treasury 10-year yield now at 16 years high

US government bonds continue to drop in value, pushing the interest rates, or yields, of 10- and 30-year bonds to levels not seen in the last 16 years. This comes as many believe the Federal Reserve (the Fed) will keep interest rates high. Additionally, the US government is issuing more bonds because of growing debt.

On Monday, the interest rate on 10-year bonds reached 4.53%, a peak not seen since October 2007. For 30-year bonds, the rate touched 4.64%, the highest since April 2011. These increases come after the Fed hinted last week at possibly raising its own rates again this year. They also mentioned that rate reductions in 2024 might be less likely. This suggests the Fed aims to control inflation by maintaining higher rates into next year.

Interestingly, shorter-term bonds have not seen as significant a jump in their yields. This has caused the difference between 10-year and 2-year yields to shrink, reaching its smallest difference since last May.

Lastly, bonds that offer protection against inflation have also seen higher yields. This indicates rising concerns not just about inflation, but also about the increasing number of government bonds in the market, especially as the Fed steps back and reduces its own bond holdings.