(Bloomberg) –The year-to-date selloff in Treasuries worsened after minutes from the Federal Reserve’s latest meeting showed officials considering earlier and faster interest-rate increases than previously expected.
Yields on 10-year Treasuries rose to as high as 1.7087%, a level last seen in April, and overnight swaps markets moved to price in an 80% chance of a 25 basis point hike at the Fed’s meeting in March. Yields on two-year notes reached 0.8316%, the highest since March 2020.
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The move reversed about half of its 12-basis-point drop on Nov. 5, when the Nasdaq 100 index suffered its biggest slide since March 2020.
The Chicago Fed president said there are signs that investment in the technology is outpacing economic capacity, creating a frothy market environment and possibly one that the Fed will tamp down with more rate hikes.
The U.S. midterm elections sparked declines for shares of large U.S. technology companies and oil prices that fueled gains for U.S. government bonds, sending yields to the lowest levels since early September.
The Treasury market last month notched its biggest gain in more than two years as investors lost faith in the sustainability of capital spending on artificial-intelligence infrastructure.
A shift in Wednesday's announcement could pave the way for potential cuts in 2027 to sales of the longest-dated debt, balanced by bigger auctions of bills and shorter-term notes.
