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US Treasuries rise on expectations Fed will tighten policy

By William Hoffman

14:38, 10 December 2021

10- and 30-year Treasuries climb one basis point on November inflation report - Credit: Shutterstock

US Treasury yields are climbing Friday as the highest jump in inflation since the early 1980s is expected to pressure the Federal Reserve to hasten the pace of its removal of accommodative monetary policies.

The longer 10-year and 30-year Treasury rates are each up by around 1 basis point, to 1.50% and 1.88%, respectively. In 2021 those longer benchmarks have traded as high as 1.74% on the 10-year and 2.45% on the 30-year.

The five-year rate was the most active, moving as much as 4 basis points higher to intraday highs of 1.3%.

Treasuries were reacting to the November Consumer Price Index print from the Bureau of Labour Statistics, which showed inflation rising at its fastest pace since 1982.


With inflation rising by 0.8% month over month and 6.8% year over year in November, market analysts are predicting the Federal Reserve will take action next week to further curb the rise.

When the Federal Open Market Committee (FOMC) meets next week, analysts expect the central bank to quicken the pace at which they wind down the Fed’s purchase of Treasuries and mortgage securities.


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Short position overnight fee -0.0009%
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Spread 0.00006


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In November, the Fed decided to begin decreasing its purchases of Treasuries and mortgage securities by $15bn (£11.4bn) per month until its pace of $120bn per month is reduced to near zero around June. Now, with inflation increasing, multiple analysts said they expect the Fed to increase that pace of so-called tapering.

“The Fed has little choice but to accelerate tapering and prepare for the possibility of much earlier rate hikes than it was planning just a few months ago,” Sal Guatieri, senior economist at BMO said in a note provided to

Rate hikes around the corner

An acceleration of tapering means the Fed could also raise the federal funds rate sooner, which is the underlying factor driving Treasury rates higher Friday.

“There could be hesitancy from the Fed due to the potential impact that Omicron may have on the economy in the coming months but it’s unlikely this will significantly alter the growth trajectory of the economy,” Dan Boardman-Weston, CIO at BRI Wealth Management, said in a note sent to “The US economy is in rude health and doesn’t require crisis levels of quantitative easing or interest rates and so it remains our view that policy will become tighter.”

He added that while inflation is high and moving higher, it should come down next year as supply chain issues remain a transitory problem.

Read more: High-flying US inflation puts pressure on Fed

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The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
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