Treasury Yields Above 4% For First Time Since January

Yields on 10-year Treasury bonds closed above 4% today for the first time since January. In a broader perspective, this is largely a bet that the Fed will hike rates soon. The Fed next meets on June 24 & 25, and markets are looking for signs of what the Fed will do with rates, and as the linked FT story says, they got it today:

The move [in Treasuries] came as a government report showed that durable goods orders were stronger than expected in April, and Dow Chemical said it was raising the price of all products by up to 20 per cent to offset rising energy and raw material costs.

We’ll get more news tomorrow when Personal Consumption Expenditures are released, and this is the Fed’s preferred measure of consumer inflation. If that number is higher, which it’s likely to be because of prolonged and sharp rises in food and energy prices, we’re in for more rate hikes. Bonds price in the expected rate hikes in advance, and this is what drives up mortgage rates.

And to clarify: 10-yr Yields are a good overall barometer for interest rate market sentiment, but mortgage rates are set by mortgage bond prices.