Benchmark Treasury yield hits 3-yr high; dollar index reaches 100

By Caroline Valetkevitch

NEW YORK (Reuters) -The U.S. Treasury 10-year yield hit a three-year high above 2.7% on Friday while the U.S. dollar index advanced to 100 for the first time in nearly two years, helped by the prospect of a more aggressive pace of Federal Reserve tightening.

U.S. stocks were mixed in choppy early trading, with the Nasdaq down 0.6% amid worries over higher yields.

This week’s release of the minutes from the Fed’s March meeting showed “many” participants were prepared to raise rates in 50-basis-point increments in coming months.

The dollar index has gained over the past month, while the euro has been pressured by investor concerns about the economic costs of war in Ukraine and a presidential election in France.

The dollar index rose above 100, its highest since May 2020. It was last flat at 99.84.

The euro dropped to a one-month low of $1.0837. It last changed hands at $1.0880, also near flat on the day.

“The dollar’s latest pop is the culmination of bullish factors ranging from geopolitical risk, election uncertainty in France, and the Fed’s increasingly hawkish outlook for interest rates,” said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington.

In Treasuries, the two-year/10-year spread remained near its widest this week.

The 10-year yield hit 2.73%, its highest since March 2019, and the yield on 10-year inflation-protection securities was within 15 basis points of turning positive for the first time in over two years.

The Dow Jones Industrial Average rose 212.55 points, or 0.61%, to 34,796.12, the S&P 500 gained 6.47 points, or 0.14%, to 4,506.68 and the Nasdaq Composite dropped 89.25 points, or 0.64%, to 13,808.05.

The pan-European STOXX 600 index rose 1.23% and MSCI’s gauge of stocks across the globe gained 0.23%.

French presidential election risk was also evident in bond markets as French borrowing costs rose while yields of other core European government bonds fell. Investors are concerned that far-right candidate Marine Le Pen could beat incumbent Emmanuel Macron.

A Le Pen victory, while still unlikely, is now within the margin of error before the first round of voting on Sunday, opinion polls showed.

In the energy market, U.S. crude recently rose 0.15% to $96.17 per barrel and Brent was at $100.36, down 0.22% on the day.

(Additional reporting by Gertrude Chavez-Dreyfuss and Rodrigo Campos in New York; Samuel Indyk and Elizabeth Howcroft in London; Editing by Nick Macfie, John Stonestreet and Andrea Ricci)