Utilities shares fell on Wednesday as Treasury yields moved higher.

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The 10-year Treasury yield rose to around 1.61% in afternoon trading, its highest level since March 2020. 

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The yield on the 30-year Treasury bond also climbed, hitting 2.36%.

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Higher yields can hurt utilities stocks because they make the sector's dividend payments less attractive to income-seeking investors.

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The Utilities Select Sector SPDR ETF (XLU), which tracks a basket of utility stocks, was down 1.5% in afternoon trading.

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The yield on the 10-year Treasury has risen sharply in recent weeks as investors have become more optimistic about the prospects for economic growth.

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The U.S. economy is expected to grow at a robust pace this year as vaccines are rolled out and stimulus measures are enacted. 

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The Federal Reserve has also signaled that it will keep interest rates low even as the economy improves.

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Despite the recent rise in yields, they remain relatively low by historical standards. 

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The 10-year yield was hovering around 3% before the pandemic.

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Investors will be closely watching the yield on the 10-year Treasury as they consider how to allocate their portfolios in the months ahead. 

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A sustained rise in yields could prompt some investors to shift money out of growth stocks and into value stocks, which tend to benefit from a stronger economy.

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