U.S. 10-year Treasury Bonds to Bring Higher Yields than Expected

by | Aug 8, 2018 | NEWS

The U.S. Treasury is set to auction $26 billion in new ten-year notes Wednesday. The offering is unique as it is set to bring yields of 3 percent – something that hasn’t happened in seven years.

CNBC reported George Goncalves, head of U.S. rates strategy at Nomura, stating, “May, 2011 was the last time we had a coupon at 3 percent or higher, just before the U.S. was downgraded.”

The ten-year is a key indicator of economic strength and investor confidence. The higher yield will affect everything from mortgage rates to business and personal loans.

The auction will be held at 1 p.m. ET and will be the largest in history. Wednesday’s auction, and each of the auctions set to take place over the next two months, will be $1 billion larger than anticipated due to last week’s expansion of quarterly refunds.

Bond yields typically move lower in August, but with the current economic factors – employment rates, inflation, and the refunding due to debt – topping three percent is a real possibility.

Some analysts, including J.P. Morgan CEO Jamie Dimon, believe the ten-year will continue to climb. Dimon was quoted by CNBC as saying, “I think rates should be 4 percent today. You better be prepared to deal with rates 5 percent or higher – it’s a higher probability than most people think.”

For Dimon, the increase in rates is an indication of a strong and growing economy, and for investors looking for higher returns, the increase is a boon. But for those looking to finance a new home or other large purchase, time may be running out on the low-interest market.