(12PressRelease.com) For the first time in nine months, KTC Capital fixed income traders are seeing the benchmark 10 year treasury yield nearing 3.7%, further indication of a strengthening U.S. economy and mounting concerns over inflation.
Since the fall of 2010, fixed income security prices have been falling as yields have crept higher. This will result in the 10 year yields passing 4% in the first half of the year, and conceivably 4.5% in the first quarter, according to KTC Capital economists. They go on to state that the 4% level would be reached sooner if it were not for the Fed's quantitative easing program. Once that program ends, it will allow the market to resume natural levels.
In the interim, bond investors will be monitoring Treasury sales this week, when $32 billion worth of three-year notes are due to be auctioned, followed by $24 billion worth of 10-year notes and $16 billion worth of 30-year notes. In advance of the auctions, Treasury prices were little changed early this week, as U.S. stocks got a boost from an onslaught of corporate mergers. Investors tend to shed bonds when they are more certain of an economic recovery.
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