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Aug. 17 (UPI) — U.S. Treasury yields on Thursday surged to levels not observed in over a decade as investors anticipate another interest rate hike by the Federal Reserve to curb economic growth.
Considered safe-haven assets due to their full backing by the federal government, U.S. Treasuries experienced a rise in the early Thursday session, with the 2-, 10-, and 30-year Treasury yields recording gains close to 5%. At one point, the 10-year yield reached its highest level since 2008.
The rally is fueled by ongoing evidence of U.S. economic expansion, despite the Federal Reserve’s efforts to slow growth through higher lending rates. Edward Moya, a senior market analyst at broker OANDA, pointed to Walmart’s strong earnings as the latest sign that U.S. consumers remain unaffected by price and lending rate increases.
“With the anticipation that COVID savings will be utilized in the coming months, along with the timing of student debt repayments, there is confidence in sustained business momentum,” he stated. “The Atlanta Fed’s estimate of 5.8% growth appears increasingly likely, which will prompt the Fed to maintain its hawkish stance and potentially tighten further to combat inflation.”
The Federal Reserve Bank of Atlanta raised its estimate for third-quarter gross domestic product (GDP) growth by 0.8%, citing robust industrial production and increased personal spending.
The latest estimate from the Commerce Department reveals that the U.S. economy, the world’s largest, expanded by 2.4% in the second quarter.
Minutes released by the U.S. Federal Reserve on Wednesday presented a mixed outlook for the future of the economy. While payroll gains remain strong and job openings have declined but remain above pre-pandemic levels, concerns arise regarding labor and wage growth as the Fed aims to dampen demand to reduce inflation without causing widespread job losses.
As of 9:45 a.m. EDT, U.S. stock indices showed stability with the Dow experiencing a modest increase of approximately 0.2%.
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