Bond Yields Surge To 6-Month Highs As Likelihood Of No-Landing Scenario Increases: UBS Warns Of Potential Fed Rate Hikes To 6.5%
Portfolio Pulse from Piero Cingari
U.S. Treasury yields have surged to 6-month highs, driven by economic resilience and inflation, moving away from expectations of Federal Reserve rate cuts. The yield on the 10-year Treasury note reached 4.61%, with bond ETFs like the iShares 7-10 Year Treasury Bond ETF (IEF) and the iShares 20+ Year Treasury Bond ETF (TLT) experiencing significant declines. UBS warns of potential Fed rate hikes to 6.5% if inflation remains high, potentially leading to a downturn in bonds and stocks.
April 15, 2024 | 9:04 pm
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The iShares 7-10 Year Treasury Bond ETF (IEF) fell to its lowest level since Nov. 13, 2023, reflecting a 5.6% decrease since its February 2024 high due to surging Treasury yields.
The increase in Treasury yields has led to a decrease in bond prices, directly impacting the performance of bond ETFs like IEF. The significant drop in IEF's price reflects investors' anticipation of higher interest rates, which negatively affects bond prices.
CONFIDENCE 85
IMPORTANCE 80
RELEVANCE 90
NEGATIVE IMPACT
The iShares 20+ Year Treasury Bond ETF (TLT) has seen a steep drop, falling more than 11% from its January peak due to rising Treasury yields.
TLT's significant decline is a direct result of the surge in Treasury yields, as higher yields lead to lower bond prices. The ETF, which holds longer-dated U.S. Treasury bonds, is particularly sensitive to interest rate changes, explaining the steep drop in its value.
CONFIDENCE 85
IMPORTANCE 85
RELEVANCE 90