10-year Treasury yield hits 3% 10-year German bond yield above 2% and U.K. yield above 3% Treasury prices tumbled on Thursday as the benchmark 10-year note yield pushed past 3%, a psychological threshold emblematic of its sharp climb since early May. The 10-year note 10_YEAR -0.13% yield, which moves inversely to price, climbed as high at 3.005% in late trade, according to FactSet. It last changed hands at 2.997%, up 9.5 basis points on the day, and its highest closing level July of 2011. The 5-year note 5_YEAR -0.27% , along with the middle portion of the yield curve, has been selling off the hardest in recent days. The yield climbed 10.5 basis points to 1.853%, its highest level since May 2011. The shorter end of the curve also rose more than it usually does, considering the Federal Reserve’s commitment to keeping short-term interest rates low. The 2-year note 2_YEAR 0.00% yield rose 4.5 basis points to 0.522%. The 30-year bond 30_YEAR -0.05% yield rose 8.5 basis points to 3.885%. The four-month selloff in bonds picked up this week, with foreign central banks leading the way, said Thomas di Galoma, co-head of fixed-income rates trading at ED&F Man Capital Markets. Federal Reserve indications that it will back away from its current monetary stimulus policies have sent shudders through emerging markets that threaten to hit Treasurys in a self-reinforcing cycle. “I don’t think there’s anything magical about 3%, mainly because the central banks have been selling Treasurys as a defense mechanism because their currencies are weak,” di Galoma said. Treasurys were weaker going into the U.S. trading day, but continued to slide after mostly positive economic news. An ADP report showed private-sector employment growth slowed to 176,000 in August, below consensus expectations of 185,000, and lower than July’s revised gain of 198,000. Weekly jobless claims, however, dropped to their lowest level since October 2007 last week, with the number of people applying for unemployment benefits down by 9,000 from the prior week to 323,000. The labor data serve as a warm-up of sorts for what may turn out to be a pivotal Friday jobs report, in which economists polled by MarketWatch expect nonfarm-payroll gains of 170,000. That may play into the Federal Reserve’s decision on whether it will begin curbing its $85 billion in monthly bond buys. But the predictive power of the ADP report is mixed at best, strategists say. “There’s been a decent amount of variation between ADP and the nonfarm payroll number,” said Robert Tipp, chief investment strategist at Prudential Fixed Income. “Over time, it’s a pretty unbiased nonfarm predictor, but at any time it could be plus or minus 50,000.” Data on Thursday also showed revised U.S. second-quarter productivity jumped 2.3%, above the prior read of 0.9%, and economist expectations of 1.9%. An ISM survey of purchasing managers climbed at its fastest pace on record in August, jumping to 58.6% from 56.0% in July. Given the recent selloff on the back of uncertain Fed monetary policy, Pimco’s Bill Gross said in a letter to investors Thursday that investors should buy short-maturity bonds. While the market largely expects the Fed to announce initial actions to begin winding down its stimulus this month, officials have said the decision hinges upon improvement in economic data. Meanwhile, the Bank of England and European Central Bank both held their policy rates steady. The ECB upgraded its projections for gross domestic product in 2013 to negative 0.4% from negative 0.6%. However, ECB President Mario Draghi acknowledged downside risks to the European economy. Read a recap of the ECB press conference. Government bonds sold off across Europe alongside Treasurys. The 10-year German bond, or bund, BX:TMBMKDE-10Y 0.00% yield was up 11 basis points to 2.045%, breaching 2% for the first time in 17 months. The United Kingdom’s 10-year bond, or gilt BX:TMBMKGB-10Y 0.00% , yield was up 13.5 basis points at 3.011%, its first time above 3% since July 2011.
Posted on: Thu, 05 Sep 2013 23:45:10 +0000
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