US 10-year Treasury yields rose to a near seven-year peak on Thursday, extending this week's bond market selloff, as traders and investors have not reached a consensus on whether it was time to buy or if the market was vulnerable to more selling. Technical indicators suggested the Treasuries market is the most oversold since three weeks ago when the 10-year yield rose above 3 percent for the first time since January 2014.
These chart signals, however, have not lured bargain-minded investors to jump back into bonds, which would send yields lower. "The market is trying to figure where the bottom is. At this point, it is not clear," said Mary Ann Hurley, vice president of fixed income with D.A. Davidson in Seattle.
The US Treasury Department's $11 billion reopening of a prior issue of 10-year Treasury Inflation Protection Securities (TIPS) drew mediocre bidding. Demand for new Treasury supply will be tested again next week with $99 billion in fixed-rate coupon issues and $16 billion in two-year floating-rate notes (FRN).
Hurley and other traders reckoned bets on rising inflation and federal borrowing will likely push the 10-year yield to 3.25 percent. Some analysts laid the blame more on technical factors behind this week's market selloff.
"It's more a technical move than one driven by fundamentals," said Bruno Braizinha, interest rate strategist at SG Corporate & Investment Banking in New York. On balance, recent US economic readings, including payrolls and consumer price data in April, have fallen short of market expectations, Braizinha noted.
New applications for US jobless benefits rose more than forecast last week after hitting their lowest level since 1969 in late April. On the other hand, Mid-Atlantic business activity rose to its strongest in a year, based on an index from the Philadelphia Federal Reserve.
Benchmark 10-year Treasury notes yielded 3.109 percent, up over 1 basis point from late on Wednesday. The yield touched 3.122 percent earlier Thursday, which was the highest since July 2011, according to Reuters data.
Since the 10-year yield on Tuesday broke above 3.05 percent, seen as a critical support level, there are no signs yet that asset managers are bailing from their hefty bullish bets on longer-dated Treasuries or that speculators are rushing out of their heavy bearish bond positions, analysts said.
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