By Ben Eisen, MarketWatch
NEW YORK (MarketWatch) -- U.S. Treasury prices sank on Wednesday
after data showed resurgent economic growth, but cut some of their
losses after the Federal Reserve released its latest policy
statement.
The 10-year Treasury note (10_YEAR) yield, which rises as prices
fall, jumped 7.5 basis points on the day to 2.536%. The yield was
set for the biggest jump since April, according to FactSet.
The 3-year Treasury note (3_YEAR) yield, was up 4 basis points
on the day at 1.023%, its first time above 1% since April 2011 on a
closing basis, according to Tradeweb. Shorter-term yields are
sensitive to indicators of Federal Reserve policy. Those yields
have been rising as investors begin to anticipate the first hike to
the central bank's key lending rate.
Here's a rundown of the morning data surge that pushed yields
higher:
* The Federal Reserve released a policy statement in which the
central bank decided to continue trimming its bond-buying program
as it methodically winds down the stimulus measures. Fed officials
mentioned a rebound in the second quarter, but noted that labor
market conditions still warranted low interest rates. It was taken
as slightly dovish by many market participants. Read more.
* Gross domestic product rose at a 4% annual pace in the second
quarter, far stronger than economists has expected. Consumer
spending was strong, and spending on construction and business
investment also picked up, the report showed. Net exports weighed
down the report slightly. Read more.
* An inflation component within the GDP report, the PCE index,
rose at a 2.3% annual rate in the second quarter, the fastest pace
since 2011. The Federal Reserve has shrugged off recent inflation
readings. Read more.
* The private sector added 218,000 jobs in July, according to
Automatic Data Processing Inc. That's down from the June reading,
and below economist forecasts of 235,000. Read more.
A nonfarm payrolls report on Friday may confirm a trend of
accelerating improvement in the labor market. Market participants
will look at the earnings growth component within the report to see
if jobs improvement is filtering through to the broader
economy.
The 5-year note (5_YEAR) yield rose 6 basis points to 1.764%,
while the 30-year bond (30_YEAR) yield rose 6.5 basis points to
3.285%.
The Treasury Department held two auctions, including $29 billion
of 7-year notes (7_YEAR) and $15 billion of 2-year floating rate
notes. Here's how they went:
* The 7-year notes sold at a yield of 2.25%. Bidders offered to
purchase 2.58 times the amount of debt sold, compared with 2.60
times in the last six sales. Indirect bidders, often a sign of
interest from foreign buyers, took down 47.4% of the notes, versus
the average of 43.5%. Direct bidders, which can include domestic
money managers, bought 15.2% of the debt, versus the average of
22.8%. Read more.
* The sale of 2-year floating-rate notes sold at a margin of
0.070%. The margin is premium that the note pays over the 3-month
Treasury bill, which is used to dictate the floating rate. Bidders
offered to buy $4.09 for ever $1 sold. Indirect bidders bought
46.7% of the notes while direct bidders took down 3.3% of the
sale.
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