NEW YORK- Treasury yields rose on Wednesday after the Bank of Canada raised interest rates, a move that could help the Federal Reserve retain a hawkish stance when policymakers meet next week and again say US rates will stay higher for longer.
The Bank of Canada hiked its key overnight benchmark rate to 4.75 percent, the highest in 22 years, on increasing concerns that inflation could get stuck materially above the central bank’s 2 percent target amid strong economic growth.
The two-year US Treasury yield, which typically moves in step with interest rate expectations, rose up 4.8 basis points to 4.573 percent, while the benchmark 10-year’s yield rose 9.3 basis points to 3.793 percent.
The bond market has been slow to accept the Fed’s repeated mantra that rates will stay higher for longer, but is now slowly coming around to that view, said Steven Ricchiuto, US chief economist at Mizuho Securities USA in New York.
“Going into this FOMC meeting there are more and more people who are looking at it and saying that it’s going to be a bit more of a permanent issue,” he said, referring to the two-day Federal Open Market Committee meeting that concludes on June 14.
“The Fed’s been saying this, but the market hasn’t been paying attention to it,” Ricchiuto said.
