The benchmark yield rose above 3% for the first time in three months before fluctuating as investors weighed the Feds decision last week to reinforce its commitment to low interest rates while starting to cut bond-buying in January.
The Fed is gradually pulling back, which means the market will pull back from its distorted levels, said Guy Haselmann, an interest-rate strategist at Bank of Nova Scotia in New York, one of 21 primary dealers that trade directly with the U.S. central bank. I expect a slow drift to 3.25% by the end of the first quarter.
The benchmark 10-year yield was little changed at 2.99% at 10:31 a.m. New York time Friday, according to Bloomberg Bond Trader prices. It increased earlier as much as three basis points to 3.02%, the highest level since July 26, 2011. The yield has climbed 10 basis points this week.