Treasury Bond Yields Surge to Two-Year Highs
NEW YORK (TheStreet) --U.S. Treasury bond yields were at their highest levels in more than two years Thursday morning as market commentators struggled to agree on the cause.
"Trading volumes were very strong. Indeed, cash was the second busiest in the last three months so we can't dismiss the action purely to illiquid conditions," wrote CRT Capital Markets government bond strategists David Ader and Ian Lyngen.
Ten-year yields hit a high of 2.94%, and once they breach the 3% level it will likely create a media frenzy and a catalyst for further selling, argued Peter Tchir of TF Market Advisors in a note published Thursday.
"The spike above 3% will be aided by the media. Just like how 'S&P 1,500' or 'DOW 10,000' or even 'IG200' headlines can attract more attention than they deserve, the '10 Year Breaks 3%' and 'Yields hit Multi Year High' headlines will be in abundance. Those headlines can and do move markets," he wrote.The selloff was somewhat puzzling to the CRT analysts as they still question the strength of the U.S. jobs recovery. They cited a National Federation of Small Business report that showed small businesses cut jobs for a fourth straight month, with each month's reading worse than the prior one. They nonetheless acknowledged a positive reading of the report was possible, but mostly dismissed it as a possible cause for the selloff. Deutsche Bank economists, on the other hand, expressed more confidence in the labor market. They observed early Thursday that nonfarm payrolls averaged gains of more than 207,000 per month in the first quarter and then what they called a "negligibly slower" 188,000 per month in the second. "Unlike last year, the job market did not exhibit a springtime swoon in hiring," they wrote. Jobs data Thursday morning added little to the discussion. Jobless claims numbers on Thursday came in below expectations at 323,000 vs. consensus estimates of 330,000. That brought the four-week moving-average down to its lowest level since October 2007, according to a Labor Dept. report. CRT noted a report from ADP Employer Services which says the US added 176,000 jobs in August," which CRT called "pretty much as expected, a tad weaker maybe." -- Written by Dan Freed in New York. Follow @dan_freed
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