U.S. government bond yields have surged to a 16-year high this Thursday, with the 10-year Treasury yield nearing the 5% mark, a level not seen since the summer of 2007. This comes as investors offload U.S. government debt amidst fears that strong economic data might prompt the Federal Reserve to maintain elevated interest rates to counteract inflation, currently almost twice its target of 2%.
Market participants are eagerly awaiting comments from Federal Reserve Chair Jerome Powell, who is scheduled to speak at the Economic Club of New York later today. His remarks are expected to shed light on the recent surge in yields.
In recent data, the Treasury International Capital report revealed that foreign investors were net buyers of long-term U.S. Treasurys in August. However, Goldman Sachs (NYSE:GS) identified China as the largest net seller, raising concerns about a potential oversupply of Treasurys surpassing demand from overseas investors. These concerns were echoed by Stephen Innes of SPI Asset Management and Mohamed El-Erian, adviser to Allianz (ETR:ALVG).
Other Federal Reserve officials, including Austan Goolsbee and Michael Barr, are also set to release statements today. The CME FedWatch tool currently indicates a 94% probability of the Fed maintaining interest rates between 5.25% and 5.50% following its meeting on November 1.
In addition to these developments, market watchers are closely monitoring U.S. economic updates slated for release today, including the Philadelphia Fed October manufacturing survey.
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