U.S. bond yields reach almost 2-year high on GDP, jobs reports

Treasuries fell, pushing 30-year bond yields (CBOT:ZBU13) to almost a two-year high, after reports showing stronger-than-forecast economic growth and jobs bolstered speculation the Federal Reserve may reduce its bond-buying.

Benchmark 10-year yields touched a three-week high after a report showed the U.S. economy grew at a faster than projected pace and the ADP Research Institute said employers added more workers than forecast in July, bolstering economist forecasts that the Labor Department’s monthly employment data released Aug. 2 will show unemployment fell in July. The Fed may comment on the path for its $85 billion in monthly purchases after a policy meeting today.

“We had a pretty strong data from the ADP to GDP that is weighing on the market ahead of the Fed,” said Richard Gilhooly, an interest-rate strategist at Toronto-Dominion Bank’s TD Securities unit in New York. “The focus remains on jobs and stronger data that continue to pressure the market to higher rates.”

The benchmark 10-year yield added six basis points, or 0.06 percentage point, to 2.67% at 10:06 a.m. in New York, according to Bloomberg Bond Trader prices. The price of the 1.75% note maturing in May 2023 lost 1/2, or $5 per $1,000 face amount, to 92 3/32. The yield reached the highest level since July 8.

Thirty-year bond yields reached 3.74%, the most since Aug. 16, 2011.

Debt Returns

U.S. government securities generated a loss of 0.2% in July through yesterday and have declined 2.6% for the year, according to the Bloomberg U.S. Treasury Bond Index.

The MSCI All-Country World Index of shares returned 5% including reinvested dividends. The difference between U.S. government debt and global equities is the most since a gap of 5.6 percentage points in January.

The difference between two- and 30-year yields widened to 339 basis points, the most since August 2011, having expanded from this year’s low of 260 basis points on April 23. A steeper yield curve reflects diminishing demand from investors for longer-maturity bonds as they anticipate quicker economic growth and inflation.

The Treasury Department announced it plans to sell the first floating-rate notes in January and expects to gradually decrease coupon-auction sizes during the coming quarter as the nation’s fiscal health improves.

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