10-Year Treasury Yield Rebounds from 3-Month Low

The yield on the US 10-year Treasury note, seen as a proxy for global borrowing costs, rebounded to above 3.5% from the three-month low of 3.4% touched on December 7th after the producer price index print surprised to the upside, raising concerns that consumer inflation could refrain from slowing further.

Better than expected ISM services data and a strong jobs report for November also extended leeway for the Federal Reserve to continue raising borrowing costs, supporting worries that interest rates will top at a higher level next year.

Still, money markets continue to price an 80% chance that the US central bank will hike rates by a slower 50bps in December.

On top of that, some sectors of the US economy, including housing and industry, have been flashing recessionary signs.

Meanwhile, the gap between 2 and 10-year bond yields widened to over 80bps, the largest since at least 1981.