US futures slump as 10-year Treasury yield rises to 1.74%

Treasury yields reached their highest since January 2020, continuing their climb after being briefly held back by the Federal Reserve's dovish words

The U.S. 10-year Treasury yield rose to 1.74% for the first time since January 2020 on Thursday, up around 10 basis points on the day, and the 30-year rate topped 2.4%.

The U.S. Federal Reserve said it expected higher economic growth and inflation in the U.S. this year and repeated its pledge to keep its target interest rate near zero.

Inflation concerns are rattling investors once again, fueling a selloff in U.S. bonds and sending Nasdaq futures sharply lower in early trading.

The Nasdaq 100 Index, a benchmark for high-valuation stocks that are sensitive to rising yields, sank 1%.

U.S. equities look poised to reverse some of the gains from Wednesday, when markets hit an all-time high. The Federal Reserve’s apparent willingness to keep pumping support into the economy and let it run hotter has spurred bets on faster growth and inflation, sending market expectations of price pressures to multiyear highs.

“The risk is that central banks will then be left playing catch-up and chasing inflationary pressure, resulting in larger aggregate tightening moves overall at a later stage,” said Simon Ballard, chief economist at First Abu Dhabi Bank.

In Asia and Europe, stocks were boosted by lingering enthusiasm from the Fed’s outlook for stronger growth. Automakers and banks, which tend to outperform during cyclical upswings, led gains in Europe. Japan’s Topix jumped past the 2,000 mark for the first time since 1991, becoming the region’s top-performing major equity index this year.

Elsewhere, oil slipped after U.S. crude stockpiles topped half a billion barrels and the International Energy Agency said global supplies are plentiful. Bitcoin traded around $59,000. The dollar ticked higher.

Japan’s government bond yields rose on a Nikkei report that the Bank of Japan is considering widening the trading range around the 10-year target, which could spur concerns about policy tightening. The Australian dollar outperformed most major currencies on a strong jobs report.