Riyadh Daily
Treasury yields maintained their upward momentum early Thursday after hitting a 19-year high in the previous session, following a U.S. business activity print that amplified expectations for Federal Reserve interest rate hikes. The benchmark 10-year Treasury yield was up one basis point to 5.124%, after reaching a 19-year high on Wednesday, jumping more than 13 basis points to 5.104%. Meanwhile, the 30-year Treasury bond was up over one basis point to 5.42%.
The 2-year Treasury note yield was little changed at 4.895%. It comes amid a global government bond selloff , with Japan's 10-year JGB yield rising 8 basis points to 3.055%, the highest since August 1996. U.K.
Gilts and German Bunds also moved higher. One basis point equals 0.01%, and yields and prices move in opposite directions. Several factors drove the Treasury selloff, including stronger-than-expected U.S. economic activity, hawkish commentary from a Federal Reserve official, and high oil prices.
S&P Global's purchasing managers' index, released on Wednesday, showed that services PMI rose to 58.7 in September, the highest level in almost five years. Its manufacturing counterpart was up to 56.7, a level not seen in over four years. The data drove expectations of more rate hikes, with traders last pricing in a 70% chance that the Federal Open Market Committee will increase rates again in its October meeting, per the CME Group's FedWatch tool .
Fed Governor Michael Barr said on Wednesday that "further policy adjustments" are likely to come to bring inflation down to target. "The main driver was a strong batch of PMIs, along with a rebound in oil prices, which both led to mounting speculation about faster rate hikes," Deutsche Bank analysts said in a note Thursday on the Treasuries selloff. "So that [PMI results] played into the narrative of resilient growth, which in turn would enable the Fed to keep hiking rates to deal with inflation," they added.
International benchmark Brent crude futures declined 0.54% at $103.66 a barrel early Thursday. U.S. West Texas Intermediate futures for November were down 0.6% to $92.68 per barrel.
Investors will await the weekly jobless claims and new home sales for August on Thursday as they look for further insights on the state of the U.S. economy.
Source: cnbc.com
