2018.04.2219:55:00UTC+00U.S. 10-Year Yield Notches 2018 High, Traders Eye 3 Percent

Treasury traders are now focusing on the pivotal 3 percent mark on the benchmark 10-year U.S. government bond notes.

After the benchmark yield rallied to a new 2018 peak just above 2.96 percent on Friday- its highest level since January 2014, market watchers are shifting their focus to 3 percent 10-year Treasury yield as a focal level for the bond market.

The spread between two- and ten- year yields has risen for the three consecutive sessions, recovering from 41 basis points on Wednesday, the narrowest gap in over a decade. The spread closed on Friday just 50 basis points short.

A rally in commodities to multi-year highs last week added pressure to government bonds by bolstering traders' inflation. While precious metals prices has trimmed some of their gains, bond traders continue to be cautious. The breakeven rate indicated by 10-year inflation-linked U.S. government bonds hit the highest since 2014 last week.

Yields are climbing as the Treasury increases debt sales to fund growing government deficits and as the Federal Reserve reduced its bond portfolio. The central bank is also hinting further interest rate hikes.