10-Year Treasury Bonds Hit 4% for First Time Since 18 Months

Ten year US Treasury Notes (US 10Y) reached 4% yesterday for the first time in 18 months. They reached the 4% level briefly on Monday before falling back to end the day at 3.99%. Yields are rising as markets prepare for more upcoming sales as well as economic indicators which show the economy is continuing to gain momentum. The good economic data includes last Friday's labor report and the pending homes sales data released today.

An auction of $8 billion in 10-year TIPS went for a lower yield than expected as foreign investors scooped up more supply than expected (read Treasury release on the auction).

The demand for TIPS may not translate into demand for vanilla Treasury bonds, since plain-Jane Treasuries lack the same inflation protection. And there is a big supply of Treasuries coming to market. This includes:

• $40 billion in 3-year notes on Tuesday
• $21 billion in 10-year notes on Wednesday.
• $13 billion in 30-year bonds on Thursday

Ten year Treasuries help to set mortgage rates and we've seen a significant uptake in these rates over the past couple of weeks.