NEW YORK: Benchmark US Treasury yields rose to six-week highs on Thursday on the likelihood that central banks in Europe will become less accommodative, before bonds pared price losses as stocks declined.
European Central Bank President Mario Draghi said on Tuesday the ECB might tweak its stimulus so it does not become more accommodative as the economy recovers. Sources on Wednesday, however, said he had not intended to signal imminent tightening.
Bank of England Governor Mark Carney also said on Wednesday that a rise in British interest rates is likely to be needed as the economy comes closer to running at full capacity.
"What's going on in Europe is really what's driving us here," said Brian Daingerfield, a macro strategist at NatWest Markets in Stamford, Connecticut.
Position squaring before month-end and the end of the first half of the year may also be behind the bond weakness, said Lou Brien, a market strategist at DRW Trading in Chicago.
Benchmark 10-year notes fell 14/32 in price to yield 2.27 percent, after earlier rising to 2.30 percent, the highest since May 17.
Treasuries pared price losses as stocks declined.
The US economy will take focus on Friday when personal income and consumption data will be evaluated for inflation signals.
"Another weak number may be a factor in the pace of rate hikes going forward," said Brien.
St Louis Fed President James Bullard said on Thursday that there is nothing left for the Fed to do on interest rates and the natural next step for the central bank would be to start trimming its balance sheet.
Data on Thursday showed the US economy slowed less sharply in the first quarter than initially estimated due to unexpectedly higher consumer spending and a bigger jump in exports.
The number of Americans filing for unemployment benefits edged up last week, but the underlying trend remained consistent with a tight labor market, other data showed.
The Congressional Budget Office (CBO) on Thursday estimated that the U.S. will have a budget deficit of $693 billion this year, $134 billion more than its prior estimate made in January.
The CBO also said that Congress will need to raise the debt limit by "early to mid-October."