Treasury yields continued their upward trend early Thursday, following a significant rise the previous day when the 10-year yield hit 5.124%, marking a 19-year high after a jump of over 13 basis points. The 30-year Treasury bond yield also increased to 5.42%, while the 2-year note yield remained stable at 4.895%.
This rise in yields is part of a broader global government bond selloff, with Japan's 10-year JGB yield reaching its highest level since August 1996. The selloff is attributed to stronger-than-expected U.S. economic activity, particularly reflected in S&P Global's purchasing managers' index (PMI), which indicated a services PMI of 58.7 and a manufacturing PMI of 56.7, both at multi-year highs.
These figures have heightened expectations for further rate hikes, with traders estimating a 70% chance of an increase in the Federal Open Market Committee's October meeting. Fed Governor Michael Barr's comments on the likelihood of 'further policy adjustments' to combat inflation have also contributed to this sentiment.
Deutsche Bank analysts noted that the combination of robust PMI data and rising oil prices has fueled speculation about accelerated rate hikes, reinforcing the narrative of resilient economic growth. Investors are now looking ahead to upcoming jobless claims and new home sales data for additional insights into the economy