- The reason why the Fed has not really signaled any concern about the spike in Treasury yields to 1.6% is that the Fed funds rate is anchored at 0-0.25% and any sell-off in the Treasury market expands net interest margins in the financial sector.
- The Fed wants a higher 10-year Treasury yield but not too high so that it does not become a problem for the economy. The Fed would not allow a Treasury yield spike that would cause the stock market to sell off like it did last March.
- Rising Treasury yields are not a U.S.-only phenomenon. Government bond yields in Europe are also moving higher for the same reason they are in the U.S. - the reopening of the economy promises higher inflation and faster economic growth.
For further details see:
The Fed Would Love A 2% 10-Year Treasury