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10-Year Treasury Yield Hits New 3-Year High

Source: NYSE

The 10-year Treasury yield hit its highest level since March 2019 on Thursday as investors continued to digest the latest moves from the Federal Reserve on its tightening policy.

After notching a high of 2.667%, the 10-year pulled back to 2.66%, while the 2-year gave up 3 basis points and dipped to 2.46%. The 10-year note ended Friday at 2.38%, but the hawkish tone from the Fed saw the benchmark rate rise this week.

The 5-year rate fell to 2.71% while the 30-year Treasury bond settled at 2.68% after briefly touching its highest level since May 2019. Yields move inversely to prices and 1 basis point is equal to 0.01%.

Yields have surged in recent days as investors weigh remarks from the Fed and minutes from its recent meeting which revealed that the central bank plans to shrink its balance sheet by $95 billion a month and potentially increase rates by 50 basis points at times.

Investors fear the Fed's more aggressive tightening approach in an attempt to combat rising inflation, could actually hurt economic growth and lead to a recession.

Inversions in Treasury yields, with investors selling out of short-dated government bonds in favor of long-dated debt, have reflected these recessionary fears.

Simon Harvey, head of FX analysis at Monex Europe, told CNBC's "Squawk Box Europe" on Thursday that the amount the Fed was withdrawing from the Treasury market wasn't necessarily "too aggressive."

He expected two consecutive 50-basis-point interest rates to be announced at the next Fed meetings.

After these two rate hikes, Harvey said the Fed would be looking to consider whether that is enough to anchor inflation expectations, to see if it could then continue to hike in 25-basis-point increments.

Harvey suggested that if this isn't enough to get inflation under control, there could be a "reassessment in a higher terminal rate," which is the end point for Fed rate hikes.

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