In The Wake Of The Highest 2-Year Note Yield Since July 2007, Treasury Yields Fell

Investors continued to monitor the inflation and economic outlooks for the United States on Monday as Treasury yields fell.

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A 2-year note yield briefly spiked to its highest level since July 2007, but it has dropped by more than one basis point since then, last trading at 4.791%, down by more than 1 basis point from its high of July 2007. There was a drop of nearly 4 basis points on the yield on the benchmark 10-year Treasury note to 3.91% on Tuesday. Prices are inversely related to yields and yields are inversely related to yields.

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There is a risk that inflation will rise faster than expected, and this will necessitate a more persistent tightening of economic policies from the U.S. Federal Reserve, which led to Wall Street's major averages ending last week with the biggest weekly loss of the year, despite businesses rising this week.

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A higher-than-expected rise in personal consumption expenditures, the preferred inflation indicator used by the Federal Reserve, sent stocks plummeting on Friday and Treasury yields soaring.

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There has been an increase in upside pressure on yields as a result of these developments. This month, the yield on the 2-year note has advanced more than 70 basis points in comparison with last month. Meanwhile, the 10-year benchmark interest rate has climbed more than 50 basis points since the beginning of this year.

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Consumers dramatically reduced their spending on large-ticket items in January as they were holding off on making large purchases. A few days later this week, we are scheduled to receive the results of the ISM manufacturing survey and the consumer confidence survey.