Yields on 10-year Treasury notes climbed to the highest in five years Tuesday as former Federal Reserve Chairman Alan Greenspan predicted an increase in benchmark yields and greater premiums on emerging-market debt.
“The moment he made that comment the market fell apart,” said Irene Tse, co-head of U.S. interest-rates trading at Goldman, Sachs & Co. in New York.
Ten-year note yields climbed as high as 5.303 percent, surpassing the Fed’s target rate for overnight loans between banks for the first time since June 28, 2006. That was the day before the central bank increased borrowing costs for the 17th straight time, bringing its benchmark to 5.25 percent.
The yield on the benchmark 10-year note rose to 5.2844 percent, an increase of 12 basis points, or 0.12 percentage point, according to bond broker Cantor Fitzgerald LP. The price of the 4.5 percent note due May 2017 fell 29/32, or $9.06 per $1,000 face amount, to 94. The yield reached 5.32 percent on May 14, 2002. Bond yields move inversely to prices.
Referring to historically low premiums on emerging-market debt, Greenspan said “it ain’t going to continue that way. And indeed, all the spreads you are looking at, including your spreads relative to the 10-year, are going to start to open up and the 10-year is going to be moving as well.”
“So I’d suggest someone out there is not going to be as happy as we are today,” Greenspan said at an event hosted by the Commercial Mortgage Securities Association in New York.
