NEW YORK: US Treasury prices fell on Wednesday, with benchmark yields rising to their highest levels in 1-1/2 weeks, as gains on Wall Street stocks and encouraging data on producer prices and factory production reduced the appeal of low-yielding bonds.
Competing corporate bond supply added to the selling pressure on Treasuries. Companies raised $22 billion in the high-grade bond market on Tuesday, according to IFR, a unit of Thomson Reuters.
Major U.S. equity indexes rose for a third straight session, propelled by higher crude prices on hopes that major oil producers would reach an agreement to freeze output in an attempt to address the global oil glut.
"The oil market's reversal higher has caused the tone to change, reviving appetite for risky assets and reducing demand for bonds," said Larry Milstein, head of government and agency trading at R.W. Pressprich & Co in New York.
Benchmark 10-year Treasury notes were down 17/32 in price for a yield of 1.840 percent, up 6 basis points from Tuesday.
The 30-year bond last traded 1-6/32 lower in price, yielding 2.701 percent, up 6 basis points on the day.
Last week, the 10-year yield fell to 1.53 percent, its lowest since September 2012, while the 30-year bond yield hit 2.38 percent, its lowest in a year.
The three major U.S. stock indexes rose over 1 percent, while U.S. oil futures were up 6 percent at $30.74 a barrel.
It was unclear how much further yields would rise as traders awaited clues on the pace of future rate increases in the minutes on the Federal Reserve's January policy meeting due at 2 p.m. (1900 GMT).
While domestic data suggested the U.S. economic expansion has continued, market turbulence due to the steep price drop in oil and other commodities and worries about China have stoked speculation whether the U.S. central bank might raise interest rates at all this year.
"The data continued to be a mixed bag. The biggest issue for the Fed right now is the market turmoil," Milstein said.
The government said producer prices edged up 0.1 percent in January, while industrial output jumped 0.9 percent for its biggest monthly rise since November 2014. Housing starts last month, however, slowed more than expected to an annualized pace of 1.099 million units.
A number of Fed policymakers have hinted in recent days they are open to leave policy rates at the current 0.25-0.50 percent range until they see further drop in unemployment and pickup in inflation.
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