U.S. 10-year bond yields hit highest in 2016

The United States benchmark 10-year Treasury yield rose 8 basis points Friday to the highest in 2016 of 2.138 percent on expectations that U.S. President-elect Donald Trump's policies, such as fiscal expansion and protectionism on international trade, could support growth and inflation.

On Wednesday, the United States Republican candidate Donald Trump pinned his victory against Democrat opponent Hillary Clinton in the 2016 presidential election. Also, Trump has indicated that he would increase fiscal spending and adopt more protectionist trade policies that could support growth and inflation.

The rout in bonds came as the Republican nominee’s seizure of the White House stoked investor expectations that inflation will accelerate and traders pared their bets on further monetary easing by central banks in Australia and New Zealand. U.S. bonds declined on Wednesday as a $23 billion Treasury auction of 10-year notes saw the lowest demand since the financial crisis, with interest from foreign buyers particularly weak. Yields on 30-year American notes increased the most in more than five years, Bloomberg reported.

Investors revised the outlook for US interest rates after Donald Trump's victory, with the probability of a December rate hike by the Federal Reserve going from as low as 30 percent to as high as 80 percent.

Moreover, initial jobless claims in the United States fell during the week ended Nov 5, from almost a three-month high in the run-up to the country’s most impactful Presidential election concluded Nov 8, with the results being declared on the following day. Also, the fall in the number of people opting for unemployment benefits has strengthened the probability of a December interest rate hike by the Federal Reserve.

U.S.’s jobless claims fell by 11,000 to 254,000 in the week ended November 5, data released by the Labor Department report showed Thursday in Washington. The median forecast in a Bloomberg survey called for 260,000. Continuing claims rose, though the four-week average dropped to the lowest since 2000.

Markets now look ahead to what stands to be a relatively quiet session on Friday (Veterans Day holiday) with only Michigan consumer sentiment on tap to finish off the week.

Meanwhile, the S&P 500 Futures traded 9 points lower at 2,158.25 by 12:40 GMT.