U.S. 2-year Treasury yield rises to 16-year high, economic data fuels rate hike expectations

U.S. 2-year Treasury yield rises to 16-year high, economic data fuels rate hike expectations

　U.S. Treasury bonds plummeted, with 2-year yields rising to their highest level since 2007, after previously released employment and services data boosted market confidence in the Fed’s resumption of interest rate hikes this month.

　　The 2-year Treasury yield rose as much as 17 basis points to 5.12%, surpassing levels hit in early March. The yield on the 10-year Treasury note climbed to nearly 4.08%, near this year’s peak.

“The Fed may have some work to do and the market is pricing in that,” said Gregory Faranello, head of U.S. rates trading and strategy at AmeriVet Securities in New York. “We could talk about a recession all day long, but in some important areas, especially employment, the short-term data was stronger than expected.”

U.S. companies added nearly half a million jobs last month, more than double expectations and the most in a year, data from the ADP Research Institute showed on Thursday. In addition, the ISM services index also rose more than expected, thanks to the recovery in the labor market.

Dallas Fed President Lorie Logan said on Thursday that further tightening of monetary policy is likely to be needed to stimulate a material decline in inflation and bring price gains back to the central bank’s target.