US 30-year yield hits highest level since 2015

Analysts expect long-term rate to end year at 3.4%

NEW YORK: The 30-year US Treasury yield rose to its highest level since 2015, showing that this year’s sell-off has spread to the most-resilient part of the world’s biggest bond market.

The yield on the long bond surpassed 3.2322%, the previous 2018 high set on Feb 21, to reach 3.2379% yesterday, highest since July 2015. It follows the 10-year borrowing benchmark in setting multi-year highs as traders grapple with surging Treasury issuance and a Federal Reserve that appears intent on boosting rates further.

The 30-year bond is under pressure from inflation expectations hovering near the highest since 2014.

Yet relative to the rest of the yield curve, the maturity has lagged in convincingly breaking to higher yields because of demand from pension funds and life insurers. The latest move suggests that even those buyers can’t keep the lurch upward in yields contained to shorter-dated obligations.

To Jeffrey Gundlach, chief investment officer at DoubleLine Capital, the 30-year yield at 3.22% on a closing basis represents the “one last pivot point” in Treasuries.

“The last man standing, and it’s really not standing very sturdily anymore, is the 30-year Treasury,” Gundlach said in a presentation in New York last month.

“If that 3.22% mark is broken convincingly, “it is not possible to make a chart case that there is anything supporting a bull market label to the bond market.”

Even so, most analysts don’t expect longterm rates to skyrocket from here. The median estimate in a Bloomberg survey of 49 analysts is for the 30-year yield to end 2018 at 3.4%. The responses are as of May 10.

Yields are jumping across the curve as bond traders price in a quicker pace of Fed rate increases.

They expect about 2.5 additional quarter-point hikes in 2018, even more than the central bank’s projections, according to fed funds futures data compiled by Bloomberg.