10-year Treasury yield hits fresh 13-month high of 1.67% ahead of Fed decision

• The Federal Open Market Committee's two-day policy meeting is set to conclude at 2 p.m. ET, followed by a press conference with Powell.
• Ian Shepherdson, chief economist at Pantheon Macroeconomics, told CNBC's "Squawk Box Europe" on Wednesday morning, that he would be "astonished" if the Fed signaled that it would step in to dampen rising bond yields at these levels.

The 10-year U.S. Treasury yield briefly topped 1.67% early on Wednesday, hitting a new 13-month high, ahead of a press conference with Federal Reserve Chairman Jerome Powell following the central bank's two-day policy meeting.

The yield on the benchmark 10-year Treasury note rose about 3 basis points to 1.65% at 10:30 a.m. ET. The yield on the 30-year Treasury bond climbed about 2 basis point to 2.411%. Yields move inversely to prices (1 basis point equals 0.01%).

The 10-year hit an intraday high of 1.676%, its top level since Feb. 6, 2020. The 30-year's intraday high of 2.428% was its highest since Nov. 12, 2019.

Wednesday's early move in the 10-year exceeded its recent high on Friday of 1.642% and reached levels not seen since early February 2020 just as the pandemic was starting to hit markets. The 30-year also hit its highest levels since early last year.

Treasurys

The Federal Open Market Committee's two-day policy meeting is set to conclude at 2 p.m. ET, followed by a press conference with Powell.

The Fed will release new economic and interest rate forecasts, which could indicate Fed officials expect to raise rates by, or even before, 2023. The central bank is expected to acknowledge stronger growth, which should put the Fed's easy policies in the spotlight, especially given the new $1.9 trillion in federal stimulus spending.

Ian Shepherdson, chief economist at Pantheon Macroeconomics, told CNBC's "Squawk Box Europe" on Wednesday morning, that he would be "astonished" if the Fed signaled that it would step in to dampen rising bond yields at these levels.

The 10-year Treasury yield has risen rapidly recently amid concerns about potential growth in inflation, as economies reopen and recover from the coronavirus pandemic. The 10-year yield started the year at 0.9%.

However, Shepherdson highlighted that this was "still close to zero in real terms."

Shepherdson believed that while Powell would once again push back on some of the market's inflation fears, he suggested the Fed chairman wouldn't talk about tapering its bond buying program in Wednesday's press conference.

He explained that this is because "as soon as the Fed starts talking about tapering, then yields will rocket immediately because that's what markets do — you give markets an inch and they take a yard — especially in Treasuries at moment."

"So the Fed therefore I think wants to keep this talk really dampened down as much as they possibly can until they can't," he added.

Shepherdson pointed out that this lack of indication from the Fed on when any policy changes might come was "kind of justifiable because this recovery is still a forecast."

Meanwhile, data the number of building permits authorized and new housing construction projects started in February is due out at 8:30 a.m. ET on Wednesday.

An auction will be held Wednesday for $35 billion of 119-day bills.

— CNBC's Maggie Fitzgerald contributed to this report.

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