Updated from 11:00 a.m. EDT
Treasuries were hammered Thursday by the threat of a strong monthly payrolls report and evidence that liquidity around the world is set to tighten.
The benchmark 10-year note fell 12/32 to yield 4.89%, the highest level since June 2002, while the 30-year bond sank 28/32 to yield 4.96%. Bond prices and yields move in opposite directions.
The two-year note edged lower 2/32 to yield 4.83%, and the five-year note lost 6/32 to also yield 4.83%.Nearly two weeks of declines have built a risk premium back into the long end, in the form of higher yields, and widened the spread between the 10-year and two-year yields to six basis points. Longer-maturity debt usually yields more than shorter-maturity debt to compensate investors for lending money for a longer period of time. However, the curve has been flat or even inverted since the beginning of the year, a phenomenon Alan Greenspan called a "conundrum" and one that often precedes recession. "I wouldn't say that the conundrum has significantly ended yet," says John Shin, senior economist at Lehman Brothers. "A lot of