October 4, 2018 / 1:15 PM / 2 months ago

TREASURIES-Sustained bond selloff pushes 10-year yield to new 7-year high

    By Kate Duguid
    NEW YORK, Oct 4 (Reuters) - The selloff in U.S. Treasury
bonds that on Wednesday sent yields to multi-year highs
continued overnight, pushing the benchmark 10-year bond yield to
its highest level since May 2011.  
    The yield on the benchmark 10-year note on
Thursday hit a high of 3.232 percent, as the strong U.S.
economic data released the day before raised prospects that the
nonfarm payrolls report due out on Friday morning would come in
stronger than expected.  
    The yield on the benchmark 10-year note on Wednesday made
its largest daily jump since the U.S. presidential election in
November 2016, as U.S. service sector activity hit a 21-year
high and ADP private payrolls data for September came in
stronger than expected.
    An index compiled by the Bank of America Merrill Lynch which
broadly measures Treasury market prices posted its worst one-day
price loss since March 2017 on Wednesday. 
    Trading in the global rates market was three times its
normal volume in the Asian session, which boosted the 10-year
Japanese government bond yield to its highest level
since January 2016, according to research from BMO Capital
Markets. The benchmark German government bond also
rose to its highest since May 2018. 
    The reports on Wednesday are likely to keep the Fed on track
to raise rates again in December and suggest the U.S. central
bank's tightening policy is unlikely to end any time soon. 
    The Fed increased rates last week for the third time this
year. Yields rose further late on Wednesday following a speech
by Fed Chairman Jerome Powell in which he said the U.S. economy
can expand for "quite some time."  
    
      October 4 Thursday 9:03AM New York / 1303 GMT
                               Price                  
 US T BONDS DEC8               137-31/32    -0-17/32  
 10YR TNotes DEC8              117-232/256  -0-56/25  
                                            6         
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             2.1825       2.225     0.002
 Six-month bills               2.35         2.4111    0.000
 Two-year note                 99-194/256   2.8762    0.016
 Three-year note               99-100/256   2.9673    0.019
 Five-year note                99-50/256    3.0501    0.026
 Seven-year note               99-40/256    3.1354    0.027
 10-year note                  97-84/256    3.1927    0.032
 30-year bond                  93-116/256   3.3484    0.029
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        17.00         0.75    
 spread                                               
 U.S. 3-year dollar swap        15.50         1.00    
 spread                                               
 U.S. 5-year dollar swap        11.25         0.50    
 spread                                               
 U.S. 10-year dollar swap        4.00        -0.25    
 spread                                               
 U.S. 30-year dollar swap      -10.00        -0.75    
 spread                                               
 
 (Reporting by Kate Duguid
Editing by Susan Thomas)
  
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