U.S. government bond yields soared to multiyear highs Wednesday after data showed the U.S. economy remained robust in September, triggering the latest retreat from safe debt.
The yield on the benchmark 10-year U.S. Treasury note, used as a reference for everything from mortgages to student debt, jumped after data showed the U.S. private sector added far more jobs than expected in September.
The yield on the 10-year U.S. Treasury note settled at 3.159% from 3.056% Tuesday, ending at its highest level since July 1, 2011, and notching its biggest one-day rise in more than a year. Longer-dated debt came under pressure too, with the yield on the 30-year U.S. Treasury bond settling at a four-year high of 3.315%, compared with 3.206% Tuesday.
Bonds, whose prices fall when yields rise, then came under further selling pressure after a separate report showed growth across U.S. service industries accelerated in September to the highest reading on record.
Together, the data showed investors that more than nine years into the current expansion, the U.S. economy continues to defy expectations of stagnation. The latest burst of confidence in the economy helped drive stocks to fresh records while sending investors out of Treasurys, which typically suffer when the growth outlook is strong.
Job seekers line up at the Amazon.com Fulfillment Center in Fall River, Mass., in 2017.The U.S. private sector added 230,000 jobs in September, according to a report. Photo: brian snyder/Reuters
“The labor force is slowing, the baby boom generation retiring, immigration barriers to entry being put in place, but somehow in the tenth year of an almost record expansion, the economy continues to be strong enough to create jobs for Americans,” said Chris Rupkey, managing director and chief financial economist at MUFG, in an email.
Renewed confidence in the economy has helped drive bond yields to fresh highs in the second half of the year after months of relatively driftless trading.
Commerce Department data showed the economy rose at a 4.2% seasonally and inflation-adjusted annual rate in the second quarter, thanks to gains in consumer spending and business investment. Measures of consumer confidence are at 18-year highs, and corporate profits are expected to grow at a rapid clip again in the third quarter.
The upbeat data have helped the Federal Reserve justify raising short-term interest rates three times this year and penciling in another quarter-percentage point increase by the end of the year. In turn, yields on two-year Treasurys—which are often sensitive to interest-rate expectations—have flirted with 10-year highs.
Elsewhere, Italian government bonds rebounded after the country’s finance minister said officials were looking at gradually reducing the budget deficit.
Worries about a potential clash over finances between Italy and the European Union had hit Italian stocks and bonds throughout the past week, although analysts regained some hope Wednesday of Italy working toward a potential resolution.
The yield on the 10-year Italian government bond fell to 3.310%, according to Refinitiv, from 3.435% Tuesday.
Write to Akane Otani at [email protected]