A trader points to a graph on a desktop computer screen in the offices of electric utility company Grundgruen Energie GmbH in Berlin, Germany (Photographer: Krisztian Bocsi/Bloomberg)  

Treasury 10-Year Yield Sets 2018 High as Traders Focus on 3%

(Bloomberg) -- Treasuries traders have a new level to focus on: the pivotal 3 percent mark on 10-year notes.

After the benchmark yield plowed to a new 2018 peak just above 2.96 percent on Friday -- its highest since January 2014, chart watchers are turning their gaze to the next round number on the horizon. Investors including Jeffrey Gundlach at DoubleLine Capital and Scott Minerd at Guggenheim Partners have previously highlighted a 3 percent 10-year yield as a critical level for the bond market.

“We’ll be heading to 3 percent pretty quickly now,” said Peter Tchir, head of macro strategy at Academy Securities Inc. “Moving above 3 percent though will be tough, as there are resistance points around 3.05 percent. This rise in the long-end yields should take some more pressure off the curve-flattening trend.”

The spread between 2- and 10-year yields has risen for three straight sessions, rebounding from 41 basis points on Wednesday, the smallest gap in more than a decade. The spread ended Friday just shy of 50 basis points.

A rally in commodities to multiyear highs this week added to pressure on government debt by stoking traders’ inflation outlook. While metals prices have given back some of their gains, bond traders remain on alert. The breakeven rate signaled by 10-year inflation-linked Treasuries reached the highest since 2014 this week.

Yields are rising as the Treasury increases debt sales to finance expanding government deficits and as the Federal Reserve trims its bond portfolio. The central bank is also signaling further interest-rate increases.

©2018 Bloomberg L.P.