WHAT YOU NEED TO KNOW
  • The 10 year Treasury yield rose more than 4 basis points to 5.32%, near its highest level since 2002.
  • Fed Governor Christopher Waller said more rate increases are needed to return inflation toward the central bank’s 2% target.
  • The Treasury prepared to auction $22 billion of 30 year bonds after selling 10 year and 3 year notes earlier in the week.
  • Weekly initial jobless claims fell to 197,000, below the 200,000 expected by economists surveyed by Dow Jones.

DISCLAIMER: GoldInvestors.news is not a registered investment, legal or tax advisor or broker/dealer. All investment/financial opinions expressed by GoldInvestors.news are from the personal research and experience of the owner of the site and are intended as educational material. Although best efforts are made to ensure that all information is accurate and up to date, occasionally unintended errors and misprints may occur.

U.S. Treasury yields climbed Thursday as traders weighed fresh comments from Federal Reserve Governor Christopher Waller and prepared for another auction of long dated government debt. The moves pushed major yields toward levels not seen in decades.

The benchmark 10 year Treasury yield rose more than 4 basis points to 5.32%, putting it near its highest level since 2002. The advance reflected another decline in Treasury prices, which move in the opposite direction from yields.

The 30 year Treasury bond yield gained more than 2 basis points to reach 5.687%. During the previous session, the long bond yield had traded just below a 24 year high.

Shorter maturity government debt also came under pressure. The yield on the 2 year Treasury note increased by more than 5 basis points to 4.818%, exceeding the moves recorded by the 10 year and 30 year yields.

MORE NEWS: Gold’s Late Week Surge Pushes Wall Street to Bullish Brink as Main Street Holds Back

One basis point equals 0.01%. That measurement is commonly used to describe relatively small changes in bond yields, even when the corresponding market move is significant for investors.

Waller said Thursday that additional interest rate increases are necessary to bring inflation down. Inflation has remained above the central bank’s 2% target for around 5 and a half years, according to his remarks.

“The hikes do not need to come at consecutive meetings,” Waller told a Central Bank of Turkey forum in Istanbul. His comments suggested that additional increases could be spaced across separate policy meetings rather than delivered immediately.

“But they should be in place in an acceptable period of time.” Waller did not say that rates had to rise at the Federal Reserve’s next meeting.

With the Federal Reserve expected to keep interest rates unchanged this month, do you think interest rates should remain where they are instead of being cut?

By completing the poll, you agree to receive emails from Gold Investors News, occasional offers from our partners and that you've read and agree to our privacy policy and legal statement.

The remarks followed the release of minutes from the central bank’s September meeting. Those minutes indicated that officials expect to raise interest rates again before the end of the year in an effort to head off inflation.

Investors expect the Federal Reserve to leave rates unchanged at its next meeting on Oct. 28. They anticipate that policymakers will then move ahead with an interest rate increase on Dec. 9.

Attention was also turning toward the third Treasury auction of the week, scheduled to take place after midday Thursday. The department was set to sell $22 billion of 30 year bonds, providing another test of demand for U.S. government debt.

On Wednesday, the Treasury sold $39 billion of 10 year notes. Global central banks accounted for more than 80% of that auction, well above the auction average of 72.4%.

Close

MORE NEWS: Vance Targets Microsoft Over Foreign Hires as Visa Data Complicates His Claim

“The 10-year auction has set the tone for the Treasury market – at least for the moment,” BMO Capital Markets’ Ian Lyngen said in a note late Wednesday.

Lyngen also addressed the market selloff that occurred between the September reopening and Wednesday’s auction. Despite the rise in yields, he pointed to the participation recorded at the sale as a reason for some reassurance.

“While the magnitude of the selloff between the September reopening and today’s auction might typically have been a reason to keep bidders on the sidelines, we take solace from the sponsorship even as it was the highest-yielding 10-year auction since November 2000.”

The Treasury had already sold $58 billion in 3 year notes on Tuesday. Thursday’s scheduled 30 year sale would complete the latest sequence of government debt auctions described in the market update.

Lyngen said the longer maturity offering would provide another important measure of investor appetite. He said Thursday’s long bond auction will be “the next barometer of demand for US debt in an environment of global deficit angst.”

Investors also reviewed the latest weekly jobless claims figures, which came in below expectations. Initial claims totaled 197,000 for the week ended Oct. 3, a decline of 2,000 from the preceding period.

The claims figure was also lower than the 200,000 expected by economists surveyed by Dow Jones. That labor market reading arrived as traders assessed Waller’s rate comments, rising Treasury yields and the approaching auction of $22 billion in 30 year bonds.

DISCLAIMER: GoldInvestors.news is not a registered investment, legal or tax advisor or broker/dealer. All investment/financial opinions expressed by GoldInvestors.news are from the personal research and experience of the owner of the site and are intended as educational material. Although best efforts are made to ensure that all information is accurate and up to date, occasionally unintended errors and misprints may occur.