The yield on the benchmark 10-year Treasury note climbed above the key 1.5% level in early trading, at one point rising above 1.51%. The yield was up by 1.7 basis points to 1.478% at 10:00 a.m. ET. The yield on the 30-year Treasury bond rose about 1.4 basis points to 2%. Both measures are trading near their highest levels in roughly three months. Yields move inversely to prices and 1 basis point is equal to 0.01%.
Treasury yields moved higher last week after the Fed hinted that it may soon taper its asset purchasing program. Additionally, a rising number of Fed officials now see a rate hike in 2022, according to projections released by the central bank last week.
“I think the big untold story of last week is the move in yields, which was pretty consistent across the board, and the bond market is starting to smell something that the equity market hasn’t quite realized yet, otherwise we would see much more differentiation,” Allianz chief economic advisor Mohamed El-Erian said on “Squawk Box.”
New York Fed President John Williams said on Monday that the U.S. economy is “close to meeting the ‘substantial further progress’ standard we laid out last December as the bar for beginning to taper our asset purchases.”
The rise in yields has also come as rising wages and supply chain issues have fueled fears of inflation.
“Let’s face it: A ten-year nominal Treasury rate in the range we’ve seen recently simply can’t have a whole lot of expectations of long-run inflation built into it,” Williams said.
Fed Chairman Jerome Powell is due to speak before the U.S. Senate on Tuesday and then at the European Central Bank Forum on Wednesday. Investors will likely be listening in for further clues as to when the Fed plans to reduce its bond-buying program.
On Monday, Fed Governor Lael Brainard is due to speak about the economic outlook at the 63rd National Association for Business Economics annual meeting at 12:50 p.m. ET.
On Monday, the August reading for durable goods orders showed a rise of 1.8%, coming in well above expectations thanks to a big jump in the transport sector. The prior month’s reading was also revised higher.
Meanwhile, investors are also keeping an eye on the progress of the $1 trillion infrastructure bill in Washington.
House Speaker Nancy Pelosi said Sunday that she expects the bill to pass this week, but voting on the legislation may be pushed back from its original Monday timeline.
Congress must pass a new budget by the end of September to avoid a shutdown, and lawmakers must also figure out a way to increase or suspend the debt ceiling in October before the U.S. would default on its debt for the first time.
Auctions are scheduled to be held on Monday for $42 billion of 13-week bills, $42 billion of 26-week bills, $60 billion of 2-year notes and $61 billion of 5-year notes.
— CNBC’s Yun Li and Jeff Cox contributed to this market report.