US Treasuries sell-off with 10-year highest since July 2011

US treasuries came under pressure on Wednesday with the yield on the 10-year touching its highest level in more than seven years and that on the 30-year reaching its highest since 2014 following a batch of upbeat economic data.

The yield on the US 10-year climbed more than 6 basis points to 3.1268 per cent — its highest level since July 2011, before edging back to 3.116 per cent at pixel time. Bond prices fall as yields rise.

Meanwhile, the yield on the 30-year rose to 3.272 per cent — its highest since October 2014, while that on the more policy sensitive two-year climbed 3.3 bps to 2.843 per cent.

Wednesday’s sell-off followed data this morning that showed showed the all-important US services sector accelerated to its highest level on record in September.

A separate report on Wednesday showed the private sector added a stronger-than-expected 230,000 jobs in September — the biggest increase in seven months. The data come ahead of the critical non-farm payroll report due Friday, that is expected to show the addition of 185,000 jobs in September and the unemployment rate dropping to 3.8 per cent, matching May’s level that was the lowest since 1969.

“We had an extremely strong ISM reading, which further suggested that the economy is extremely strong at the moment,” said Jon Hill, a strategist at BMO Capital Markets. “Then we tripped some technical levels in the long end of the Treasury market, which exacerbated the sell-off.”

Andrew Hunter, economist at Capital Economics, said continued strength in both the manufacturing and services ISM survey imply that “ growth is set to remain well above trend”. He added: “That will keep the Fed raising interest rates steadily in the near term, although we still expect that an economic slowdown will convince officials to move to the side-lines by the second half of next year.”

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Renewed appetite for risk has weighed on Treasuries amid strength in the job market and has, in turn, helped push Wall Street back to record highs.


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