NEW YORK: The bond market has wasted little time pushing Treasury yields sharply higher in the early days of 2022, underscoring concern that elevated inflation will spur more aggressive monetary-policy tightening from the Federal Reserve (Fed).
The jump has been led by the 10 and 30-year benchmarks, steepening the yield curve in a sign traders expect economic growth and high inflation won’t be derailed by the record surge in the Omicron variant of the coronavirus. That outlook may be underscored by the release of the Federal Open Market Committee’s (FOMC) minutes of its December meeting, when it decided to move more quickly to wind down the bond-buying spree ushered in after the onset of the pandemic.
“Omicron may slow economic activity in January, but we are seeing evidence that the variant is milder and that raises the prospect of clearer sailing for the global economy this year,” said David Kelly, chief global strategist at JPMorgan Asset Management Inc in New York. In that scenario, the present low level of Treasury yields means “it doesn’t take much to push them higher.”
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