10-year US bond yields hit highest level since June on Fed rate expectations

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Benchmark U.S. Treasury yields rose to their highest level since June on Tuesday, on expectations the Federal Reserve will continue to raise interest rates as it fights the rise. Of the prices.

* The market expects the Fed to raise rates another 75 basis points at its meeting on September 20-21, which would raise the fed funds rate to between 3.0% and 3.25%. This represents an increase from the band of zero to 0.25% in March.

* Concerns that inflation will remain elevated if energy prices rise ahead of winter are adding pressure to government bond yields. Russia has kept one of its main gas supply routes to Europe closed, stoking fears of fuel shortages during the northern hemisphere winter.

* Meanwhile, the Fed is increasing the amount of bonds it will let off its balance sheet this month as part of its efforts to normalize monetary policy.

* The Fed will now allow $95 billion in bonds to come off its balance sheet each month, including $60 billion in Treasuries and $35 billion in mortgage-backed debt.

* The benchmark 10-year debt yield was trading at 3.313%, its highest level since June 21. The return has risen from a four-month low hit on August 2 at 2.516%, but remains below an 11-year high of 3.498% hit on June 14.

* Two-year bond yields, sensitive to interest rates, were trading at 3.486%, after hitting 3.551% on Thursday, their highest level since November 2007.

* The yield curve between 2-year and 10-year notes remained inverted by -18 basis points, an indicator that a recession is likely within a year or two. However, the reversal is less severe than the level of -56 basis points reached on August 10.

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* The large amount of expected investment grade corporate debt supply also weighed on the market on Tuesday.

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