US Treasury yields rose on Thursday in choppy trading as stocks pared some of their earlier weakness and after the Bank of England said interest rates probably need to rise sooner, adding to expectations of reduced central bank stimulus globally. Rising bond yields have spooked equity investors who worry that higher rates may slow down growth. Volatility in equities, at the same time, has at times added to a bid to hold low risk US government debt.
"It is circular," said Ian Lyngen, head of US rates strategy at BMO Capital Markets in New York. "Higher rates lead to lower stocks and lower stocks lead to lower rates to some degree, and we're trying to figure out where the transfer mechanism from higher rates into slower growth potential is going to occur." Improving inflation and other economic data has led investors to adjust for the prospect of faster economic growth and the potential that the Federal Reserve may raise interest rates faster than previously expected.
Benchmark 10-year note yields rose as high as 2.884 percent on Thursday, just below Monday's four-year high of 2.885 percent. The notes were last down 6/32 in price to yield 2.853 percent. Investors are also preparing for a large uptick in US government debt issuance this year to make up for declining purchases by the US central bank.
The Treasury saw relatively soft demand for a $16 billion sale of 30-year bonds on Thursday, the final sale of $66 billion in coupon-bearing supply this week. The debt sold at less than 1 basis point higher than where the bonds traded before the auction. The result was not bad, however, considering that bonds rallied heading into the auction as stocks fell.
Comments
Comments are closed for this article.