Treasury yields fell on Wednesday as prices rose, but traders were wary of the rally's speed, and some wondered whether a pullback might be in store for the market on Thursday. Prices soared as data on private payrolls and manufacturing came in well below expectations, causing economists to scramble to revise lower their forecasts for Friday's May jobs report.
The 10-year Treasury yield broke below the significant 3 percent level and hit a fresh six-month low. The 30-year yield, which is considered an indicator for inflation expectations, also traded at its lowest level since early December. But David Coard, head of fixed income sales and trading at Williams Capital Group in New York, said he was preparing for a possible reversal of some of Wednesday's price action on Thursday.
"We've moved a long way pretty quickly today - 30s are up over a point (in price)," he said. "Unless we see more weakness tomorrow from economic data or you get more troubling news out of the situation in Europe I think you're going to get a pullback on Treasuries."
The Treasury market sprinted out of the gate on the first trading day in June after a solid May. Barclays Capital's Treasury total return index rose 1.56 percent last month. Reduced growth and inflation expectations hurt results on Treasury Inflation Protected Securities. Barclays' index registered a slim 0.31 percent gain in May.
Benchmark 10-year Treasury notes last traded up a full point in price, with gains accelerating late in the affternoon as US stocks plunged The 10-year yield was at 2.95 percent, a level not seen since early December. On Tuesday, the yield ended at 3.05 percent, a key resistance level that had held in the prior four sessions. The 30-year Treasury bond jumped 1-12/32 in price for a yield of 4.15 percent. Growing perception of a US growth and inflation slowdown narrowed the spread between short-dated and long-dated yields. The two-to-10-year part of the yield curve flattened to 253 basis points, a level not seen in about six months.