The increasing likelihood of former US treasury secretary Larry Summers becoming Fed chairman next year has prompted a further spike in bond yields, analysts suggest.
Benchmark US treasury yields have spiked again in recent days as the Federal Reserve's pivotal 18-19 September policy meeting draws closer.
Yields on 10-year debt rose to a two-year high of almost 2.9% on Monday, in anticipation of the Fed announcing a slowdown in its QE programme at the September meeting.
That continued a sell-off that has seen 10-year yields rise 70 basis points since mid-June, with yields on gilts and other safe haven debt also moving higher.
Ten-year yields rose by some 28bps last week alone, despite the relative absence of significant economic data points.
Analysts have pointed to the potential arrival of Summers (pictured) as chairman Ben Bernanke's replacement on 31 January 2014 as a catalyst for that slump.
Summers is vying with Fed board vice chairwoman Janet Yellen to succeed Bernanke, with an announcement expected this autumn.
But his stance on QE has given bond investors cause for concern. Summers is a known sceptic of the merits of asset purchases, leading some to think his arrival at the Fed would lead to a faster ‘tapering' of the programme.
"The identity of the next Fed chairman will also in all probability be important for the trajectory of bond yields as well, since it creates uncertainties about the policy outlook and in particular the commitment to QE," said equity strategist John Lomax.
"In particular, the latest sell-off in US bonds seems to have a significant part of its origin in an increase in the perceived likelihood that Larry Summers will be the next Fed chairman."
Monument Securities analyst Marc Ostwald agreed the recent sell-off may be the result of markets "starting to discount the possibility that the QE-unenthusiastic Summers is the front runner as next Fed chairman".
The next test for the treasury market will be the release of minutes from the Fed's July policy meeting later today.
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