NEW YORK (Reuters) – Expectations that the global economy has dodged the worst-case coronavirus pandemic scenarios have led to a dramatic sell-off in U.S. government bonds from their record highs, pushing the yield curve to its steepest level since March.
Investors will get a chance next week to see whether the U.S. Federal Reserve agrees with their optimism. The U.S. central bank’s two-day meeting, ending on Wednesday, will be the first since April when Fed Chair Jerome Powell said the U.S. economy could feel the weight of the economic shutdown for more than a year.
The meeting will follow a surprise gain in the Labor Department’s closely watched jobs report on Friday that pushed benchmark 10-year Treasury yields to the highest since early March.
“The sell-off in the bond market in the last few weeks seems to be justified,” said Subadra Rajappa, head of U.S. rates strategy at Societe Generale.
While the Fed could introduce additional bond-buying programs known as quantitative easing or yield-curve control measures to target short-term rates,