The U.S. 10-year Treasury yield continued to creep higher last week despite a disappointing number of new jobs added during September. Ending the week at 1.61%, the yield reached its highest level since June.
The concern in the Treasury market continues to grow as the Federal Reserve’s (Fed) much-anticipated tapering of its asset purchases approaches. The expectation is for the Fed to start slowing its purchases of securities in either November or December. As the timing of tapering gets closer, inflationary pressures in the market are also rising. The price of oil is now more than $80/barrel, and the concern for further increases in energy prices is growing on tight supply.
This week, the release of the Consumer Price Index will be closely scrutinized to determine the path of inflation. I expect the path of least resistance for interest rates is higher, and the high yield of the year at 1.75% will likely be tested in the next few weeks.
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