Where did the slow-moving, deep and placid Treasury market go?
The yield on the 10-year benchmark Treasury–you know the one used to set the interest rate on things like mortgages–moved up another 13 basis points today, October 3, to 4.80%.
That’s a jump to 24 basis points in just two days.
The Treasury market just doesn’t move like this.
The yield on the 10-year Treasury is now up 63 basis points in the last month.
What’s especially striking to me is that this plunge in Treasury prices and this surge in yields, is coming against a background where the Federal Reserve is debating whether to raise the policy rate by another 25 basis points at the November 1 or December 20 meetings.
And when the financial markets remained convinced that the Fed won’t raise rates at either meeting.
The 24 basis points tacked onto the 10-year yield in the last two days is essentially equal to the entire increase that the Fed is contemplating for the remainder of 2023.
I’ve speculated before that the Fed was in danger of losing control of interest rates. I’d conclude now that has happened. The yield is being driven, I think, by the Treasury market and its strain in absorbing a huge amount of new issuance from the Treasury Department.
I think yields are headed higher yet until the lump of new bonds moves all the way through the snake.
