NEW YORK: US two-year Treasury yields hit their highest levels in 4-1/2 years on Thursday on continued expectations that the Federal Reserve will hike rates in December, while long-dated yields also rose on fresh corporate supply.
Short-term yields touched 0.854 percent, extending their rise sparked on Wednesday when Fed Chair Janet Yellen and New York Fed chief William Dudley pointed to a possible December rate hike.
Yields on other maturities also rose. Three-year yields touched a fresh four-month high of 1.157 percent. U.S. 10- and seven-year yields hit seven-week highs of 2.252 percent and 2.008 percent, respectively.
Traders awaited a key U.S. non-farm payrolls report for October due Friday. Analysts said the report would likely reinforce expectations of a December rate hike.
"Many in the market feel the Fed is expressing a predisposition to go in December," said John Briggs, Americas head of strategy at RBS in Stamford, Connecticut. "Investors have adjusted their probabilities, adjusted their risk, adjusted their positions, now they're going to see what happens tomorrow," he said in reference to the U.S. jobs data.
Economists expect Friday's U.S. non-farm payrolls report to show that U.S. employers added 180,000 jobs last month, which would be above the prior month's 142,000 figure.
U.S. 30-year yields hit a more than six-week high of 3.029 percent overnight. Analysts said continued corporate bond supply led traders to sell 30-year U.S. government debt and favor similarly-dated corporate bonds.
"The corporate issuance is weighing on the long end of the Treasury curve," said Justin Lederer, Treasury strategist at Cantor Fitzgerald in New York.
Among new supply, Halliburton is due to price a five-tranche U.S. dollar bond to finance its acquisition of Baker Hughes on Thursday, with the market anticipating a $7bn-8bn sized deal.
U.S. two-year Treasury notes were last virtually flat in price to yield 0.846 percent. Benchmark 10-year notes were last down 5/32 in price to yield 2.250 percent, from a yield of 2.230 percent late Wednesday.
U.S. 30-year bonds were last down 13/32 to yield 3.016 percent, from a yield of 2.994 percent late Wednesday.
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