NEW YORK: Encouraging economic data sparked selling in US Treasuries on Thursday, sending benchmark yields to their highest levels in nearly seven weeks, a day after the US Federal Reserve hinted it was in no hurry to raise interest rates.
News of the biggest concessions yet from Greece in an effort to clinch a deal with its creditors to avert bankruptcy reduced safe-haven bids for Treasuries and German Bunds.
The four-day rise in benchmark US yields has been part of this week's global bond market sell-off, in which traders have either booked profits on positions tied to the European Central Bank's 1.1 trillion euro bond purchase program or cut losses on bets that yields on US, German, British and other core government bonds will stay at rock-bottom levels due to weak global growth, analysts said.
"There had been a tremendous amount of complacency in the bond market. Now it's people removing duration risk off the table," said Mike Cullinane, head of Treasuries trading at D.A. Davidson in St. Petersburg, Florida.
Hefty supply of Treasuries and European government debt together with competition from higher-yielding corporate bonds also have driven up US and euro zone yields.
Thursday's data showing a drop in jobless claims, a rise in consumer spending, wage gains and a jump in Midwest business activity suggested an economic rebound in the economy following a meek first quarter, when gross domestic product grew at an annual rate of 0.2 percent.
Some traders downplayed the GDP figure, noting that the US central bank on Wednesday acknowledged the economy had hit a soft patch due partly to a harsh winter.
"We need to see a trend of better data. Today was a mixed bag," said Larry Milstein, head of US government and agency trading at R.W. Pressprich & Co. in New York.
The bond market, analysts said, is poised for a comeback, with technical signals suggesting it is oversold. They said it could also see strong buying from bargain-minded investors and month-end portfolio adjustments.
In late morning US trading, intermediate Treasuries fared worst among all maturities with the five-year yield breaking above 1.50 percent for the first time in six weeks.
The yield on benchmark 10-year Treasury notes climbed to 2.099 percent after touching the highest level in nearly seven weeks at 2.108 percent.
The 30-year Treasury bond yield rose to 2.796 percent after hitting a seven-week high at 2.809 percent.
Treasuries fared better than German Bunds as the 10-year Bund yield hit 0.385 percent, the highest in eight weeks.
Comments
Comments are closed.