U.S. Treasury Yields Rise After Positive Jobs Data -- 2nd Update
By Sebastian Pellejero and Sam Goldfarb
A wave of selling in U.S. government bonds intensified on
Thursday, sending yields soaring after new data indicated a
strengthening economic recovery and an auction of seven-year
Treasurys met with tepid demand from investors.
The yield on the benchmark 10-year Treasury note reached as high
as 1.539% before finishing Thursday's session at 1.513%, according
to Tradeweb -- its highest level in a year and up from 1.388% at
Moves were also pronounced in shorter-dated bonds. The five-year
yield rose to 0.799% Thursday from its previous close of 0.612% --
the largest one day gain since December 2010.
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 when they expect faster growth
and inflation, which lowers the value of bonds' fixed payments and
can eventually lead the Federal Reserve to raise short-term
Yields rose later in the session following a $62 billion auction
of seven-year Treasurys that analysts said showed extremely weak
interest from investors.
"The intermediate area of the curve has undergone a truly
violent selloff over the last 2 days and the auction results
suggest no one has the stomach to try and step in to turn the
tide," wrote Jefferies analysts in a note after the auction.
Thursday's move extends a recent climb in government bond yields
that has started to capture the attention of investors across a
range of asset classes. The yield on the 10-year note, a bellwether
for borrowing costs on everything from mortgages to corporate
loans, has jumped to more than 1.5% from around 1% in a matter of
weeks, lifted by increased expectations that vaccines and
government stimulus efforts will accelerate growth and
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
"Right now, it seems as though nobody really wants to buy the
dip," he said.
Fed Chairman Jerome Powell 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.
Comments from Fed officials that they aren't worried about
rising yields have only added to the selling pressure in the bond
market, analysts said. For much of last year, investors expressed
confidence that the Fed -- in order to support the economy -- would
prevent yields from rising much higher than 1% by increasing the
amount of longer-term Treasurys that they buy each month. But that
confidence has since evaporated, removing a key constraint on
Investors "are sort of pouting about it," said Jim Vogel,
interest-rates strategist at FHN Financial, referring to the Fed's
lack of interest in buying more longer-term Treasurys.
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 firstname.lastname@example.org and
Sam Goldfarb at email@example.com
(END) Dow Jones Newswires
February 25, 2021 16:32 ET (21:32 GMT)
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