Bond shoppers: 10-year yields pushing near 4%

benchmarkyield1yearfeb7monday.pngClick on the chart for other bond data. By Catherine Clifford, staff reporter

NEW YORK (CNNMoney) -- A strengthening U.S. economy and growing concerns over inflation will likely push the benchmark 10-year Treasury yield back over 4% this year, experts say.

Treasury prices have been falling - and yields marching higher - since the fall. During trading Monday, the benchmark yield rose as high as 3.68%, the highest level since early May. Bond prices and yields move in opposite directions.

"The combination of improving growth and some rising inflation fears" are pushing prices down, said Kim Rupert, fixed income analyst for Action Economics.

As a result, 10-year yields will probably hit 4% in the first half of the year, and possibly even in the first quarter, rising to 4.5% by year-end, said Rupert.

Meanwhile, Brian Edmonds, head of interest rate trading at Cantor Fitzgerald, said he sees the benchmark yield hovering at 3.75% for the time being, and not pushing above 4% until the second half of the year once the Fed's quantitative easing program ends.

"If it is clear that the economy is picking up, inflation is starting to normalize, and the FOMC is going to be ending the purchase program, I think we could see more of a sustained rise in interest rates at that point," said Edmonds.

The Federal Reserve is currently buying $600 billion in Treasuries of varying lengths, in an effort to stimulate the economy.

The Fed's purchases affect supply, raising prices and keeping a cap on yields, Edmonds contends. The Fed is making an estimated $14.5 billion to $19.5 billion worth of purchases in the first half of this week.

Not everyone, though, believes the Fed's quantitative easing is keeping a lid on rates.

The program "is doing more harm to the Treasury market than it is providing support," said Rupert. "There is a lot of talk that the Fed's actions are becoming more inflationary."

Either way, both market watchers agree inflation is a hazard for Treasury investors, who could see the value of their investment erode as they hold bonds for months or years.

"From an inflation standpoint, there are a lot of concerns out there," said Edmonds, adding that "once we get inflation, it will be very difficult to stamp it out."

In the meantime, bond investors will be keeping an eye on Treasury sales this week. The Treasury is scheduled to auction $32 billion worth of three-year notes Tuesday. Wednesday, $24 billion worth of 10-year notes come up for auction and Thursday, $16 billion worth of 30-year notes hit the selling block.

Ahead of the auctions, Treasury prices were little changed Monday, as U.S. stocks got a lift from an onslaught of corporate mergers. Investors tend to sell bonds when they are more confident in an economic recovery.

The 30-year yield was down slightly at 4.70%. The benchmark 10-year was basically unchanged at 3.64%. The 5-year was also little changed at 2.28% and the 2-year note yield was 0.78%. To top of page

Just the hot list include
Frontline troops push for solar energy
The U.S. Marines are testing renewable energy technologies like solar to reduce costs and casualties associated with fossil fuels. Play
25 Best Places to find rich singles
Looking for Mr. or Ms. Moneybags? Hunt down the perfect mate in these wealthy cities, which are brimming with unattached professionals. More
Fun festivals: Twins to mustard to pirates!
You'll see double in Twinsburg, Ohio, and Ketchup lovers should beware in Middleton, WI. Here's some of the best and strangest town festivals. Play
Overnight Avg Rate Latest Change Last Week
30 yr fixed3.80%3.88%
15 yr fixed3.20%3.23%
5/1 ARM3.84%3.88%
30 yr refi3.82%3.93%
15 yr refi3.20%3.23%
Rate data provided
View rates in your area
Find personalized rates:
Index Last Change % Change
Dow 32,627.97 -234.33 -0.71%
Nasdaq 13,215.24 99.07 0.76%
S&P 500 3,913.10 -2.36 -0.06%
Treasuries 1.73 0.00 0.12%
Data as of 6:29am ET
Company Price Change % Change
Ford Motor Co 8.29 0.05 0.61%
Advanced Micro Devic... 54.59 0.70 1.30%
Cisco Systems Inc 47.49 -2.44 -4.89%
General Electric Co 13.00 -0.16 -1.22%
Kraft Heinz Co 27.84 -2.20 -7.32%
Data as of 2:44pm ET


Bankrupt toy retailer tells bankruptcy court it is looking at possibly reviving the Toys 'R' Us and Babies 'R' Us brands. More

Land O'Lakes CEO Beth Ford charts her career path, from her first job to becoming the first openly gay CEO at a Fortune 500 company in an interview with CNN's Boss Files. More

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.