Treasury Yields Jump, 10-Year to 4.28%, 30-Year to 4.90%, Mortgage Rates Spike to 6.41%, on Inflation & Deficit Fears

Core Viewpoint - The U.S. Treasury market experienced significant selling pressure, with the government selling $651 billion in Treasury securities amid rising yields and inflation concerns, particularly driven by surging gasoline prices and disappointing inflation data [1][4]. Treasury Market Activity - The U.S. government sold $651 billion of Treasury securities this week across nine auctions, including $532 billion in Treasury bills and $119 billion in Treasury notes and bonds [4][5]. - The 1-year Treasury yield surpassed the Effective Federal Funds Rate (EFFR) for the first time since November 2023, indicating that the bond market has largely dismissed rate cut expectations for the year [2][4]. - All Treasury yields across the yield curve are now at or above the EFFR, suggesting that rate cuts are not anticipated in the current market scenario [4]. Yield Trends - The 3-year Treasury yield rose significantly, closing at 3.74% after a 16 basis point increase since its auction, marking a total spike of 36 basis points over two weeks [7][8]. - The 10-year Treasury yield increased to 4.28%, the highest since early February, reflecting a 13 basis point rise during the week [12]. - The 30-year Treasury yield reached 4.90%, the highest level since earlier this year, indicating growing concerns about long-term inflation and interest rates [14][16]. Mortgage Market Impact - Mortgage rates surged to 6.41%, the highest since early September, with a notable increase of 42 basis points over the past two weeks [18]. - The relationship between mortgage rates and long-term Treasury yields remains significant, with mortgage rates typically tracking the 10-year Treasury yield but at higher levels [19]. - Announced buybacks of mortgage-backed securities (MBS) by Fannie Mae and Freddie Mac are intended to reduce the spread between mortgage rates and Treasury yields, although they may increase concerns in the bond market [20].