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US 10-year Treasury yield hits 14-month high as inflation concerns increase

President Biden will travel to Pennsylvania to set out plans for a $3tn stimulus package

The US 10-year Treasury yield rose to 14-month highs on Tuesday as expectations for strong growth and inflation caused a sell-off in bond markets.

According to Bloomberg data, the 10-year yield increased by 0.05% from yesterday’s closing level to above 1.76%, the highest point since January 2020, just over a year ago.

The recent round of selling resulted from investors’ positive outlook over America’s vaccine rollout and an additional stimulus package.

Bond markets in America have headed up a global retreat in government debt since the start of the year, as investors worry that the Fed will allow the economy to heat up, with vast amounts of spending along with monetary stimulus to raise inflation.

An index of debt issued by governments in the developed world has dropped by 5% since January on a total return basis.

Joe Biden said on Monday that by the middle of April 90% of adults would have access to a vaccine at a site within 5 miles of their home address. The President will also travel to the state of Pennsylvania on Wednesday to set out plans for a $3tn stimulus package, following his $1.9trn stimulus payment to citizens this month.

Rupert Thompson, chief investment officer at wealth manager Kingswood, said the “massive” scale of stimulus in the US and globally has caused “considerable nervousness over inflation and has been behind the recent sell-off in government bonds”.

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