Ahead FOMC Minutes, T-Yield Curve Steepens

A sign of optimism prevails across financial markets that virus infections surge will not lead to big economic hindrance. After a wave of selloff, long-term treasury yields are nearing breaching 2021 highs.

The bond market has wasted little time pushing Treasury yields sharply higher in the early days of 2022, underscoring concern that elevated inflation could shoot more aggressive monetary-policy tightening from the Federal Reserve.

The yields’ jump has been led by the 10- and 30-year benchmarks, steepening the curve to signal economic growth and high inflation will not be derailed by the record surge in the omicron variant of the coronavirus.

Traders seem to have received the significant signal that the economic outlook may be underscored by the release Wednesday of the Federal Open Market Committee’s minutes of its 15 December meeting, when it decided to move more quickly to wind down the bond-buying spree ushered in after the onset of the pandemic. Traders also bet that Fed will stick to the apparent hawkish path as interest rate hikes are looming.