The 10-year yield on US Treasuries hit 1.64% early Wednesday, hitting a new high in 13 months ahead of a press conference with Federal Reserve Chairman Jerome Powell following the central bank’s two-day policy meeting.
The yield on the benchmark 10-year Treasury bond rose to 1.644% at 6 a.m. ET. The yield on the 30-year government bond rose to 2.395%. Revenues move inversely with prices.
The two-day Federal Open Market Committee policy meeting ends at 2:00 p.m. ET, followed by a press conference with Powell.
The Fed will release new economic and interest rate forecasts, which may indicate Fed officials expect to hike interest rates by or even before 2023. given the new $ 1.9 trillion in federal stimulus spending.
Ian Shepherdson, chief economist at Pantheon Macroeconomics, told CNBC’s “Squawk Box Europe” Wednesday morning that he would be “surprised” if the Fed said it would step in to dampen rising bond yields at these levels.
Yields on 10-year Treasury bonds have seen a rapid rise recently amid concerns about potential inflation growth as economies reopen and recover from the coronavirus pandemic. The 10-year yield is up more than half a percent since the end of January, hitting 1.6% in recent weeks.
However, Shepherdson stressed that this was “still close to zero in real terms.”
Shepherdson believed that while Powell would once again push back some of the market’s inflation fears, he suggested the Fed chairman would not talk about winding down his bond buying program at Wednesday’s press conference.
He explained that this is because “as soon as the Fed starts talking about tapering, yields immediately skyrocket, because that’s what markets do – you give markets a thumb and they take a yard – especially in government bonds right now.”
“So that’s why I think the Fed really wants to keep this conversation down as much as possible until they can’t do it anymore,” he added.
Shepherdson pointed out that this lack of indication from the Fed when policy changes would come “was reasonably justified because this recovery is still forecast.”
Meanwhile, data on the number of approved building permits and new residential construction projects that started in February will be released Wednesday at 8:30 a.m. ET.
An auction will be held Wednesday for $ 35 billion in 119-day bills.
CNBC’s Maggie Fitzgerald contributed to this report.