The 10-year U.S. Treasury yield retreated on Friday morning, but remained above the 1.45% mark, after surging above 1.6% in the previous session.
On Thursday, the 10-year yield jumped more than 16 basis points to 1.614%, its highest level since February 2020 and more than half a percentage point up on the end of January.
The move unnerved investors and put pressure on stock markets, with the Nasdaq suffering its worst one-day loss since October.
The spike in the 10-year yield, which is used as a benchmark for mortgage rates and auto loans, has been driven by expectations of improving economic conditions as coronavirus vaccines are rolled out, as well as fears of higher inflation.
The U.S. House of Representatives is set to approve the $1.9 trillion Covid relief spending package by Friday, bolstering expectations of economic recovery.
However, Wells Fargo strategists said in a note Thursday that they believed “the odds have been increased the Fed will have to attempt to talk down the recent move higher in rates.”
Meanwhile, Hans Mikkelsen, credit strategist at Bank of America, said that since the summer economists had “consistently underestimated economic growth to an extent never seen before.”
“There appears a real risk the Fed is not going to be able to sound dovish much longer and that transition could see wider credit spreads,” he said.
Looking ahead, data measuring growth in U.S. personal income and spending in January is due to be released at 8:30 a.m. ET on Friday.
January data for personal consumer expenditures, which tracks the changes in the cost of good and services purchased by consumers and is the Federal Reserve’s preferred inflation measure, is also due out at 8:30 a.m. ET.
The University of Michigan’s final readings on U.S. consumer sentiment for February are expected out at 10 a.m. ET.
There are no auctions due to be held on Friday.
— CNBC’s Patti Domm and Bob Pisani contributed to this report.