U.S. Treasury Yields Rise After Positive Jobs Data
February 25 2021 - 1:05PM
Dow Jones News
By Sebastian Pellejero
U.S. government bond yields extended a recent surge Thursday
after new economic data indicated a strengthening recovery from the
coronavirus pandemic.
The yield on the benchmark 10-year Treasury note recently traded
at 1.462%, according to Tradeweb, up from 1.388% at Wednesday's
close. Moves were also pronounced in shorter-dated bonds, with the
five-year yield at one point hitting 0.760%, up from 0.612%
Wednesday.
Yields, which rise when bond prices fall, climbed after Labor
Department data showed that the number of jobless claims fell
sharply last week, signaling the job market could be stabilizing
after layoffs edged higher earlier in the winter. Investors tend to
sell Treasurys and buy riskier assets like stocks when they expect
the economy to improve.
Thursday's move extends a recent climb in government bond
yields. The yield on the 10-year note, a bellwether for borrowing
costs on everything from mortgages to corporate loans, has jumped
to near 1.5% from around 1% in a matter of weeks, lifted by
increased expectations that vaccines and government stimulus
efforts will accelerate growth and inflation.
While Federal Reserve officials have said the yield's climb
toward pre-pandemic levels marks a return to normalcy and isn't
problematic, some investors are worried that a pickup inflation
could force the central bank to raise interest rates faster than
expected, said Gennadiy Goldberg, U.S. rates strategist at TD
Securities.
"Right now, it seems as though nobody really wants to buy the
dip," he said.
Fed Chairman Jerome Powelll told lawmakers this week that while
the economy has picked up since the depths of the slowdown, the
central bank intends to maintain its easy-money policies until
"substantial further progress has been made" toward its employment
and inflation goals. The central bank cut interest rates to near
zero and committed to buying billions of dollars of bonds to keep
U.S. borrowing costs down and help aid the recovery.
If yields continue to rise, that could pressure stocks and
increase borrowing costs for companies and consumers, which some
worry could fuel further volatility.
"As rates rise, a lot of the products that used Treasurys as
their benchmark tend to rise as well, and that produces natural
hedging needs for investors," said Mr. Goldberg.
Write to Sebastian Pellejero at sebastian.pellejero@wsj.com
(END) Dow Jones Newswires
February 25, 2021 12:50 ET (17:50 GMT)
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