Treasuries Find No Hiding Place Between Fed Rates and Bund Slide

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Whichever way you look, Treasuries are in for a beating.

U.S. 10-year notes have fallen this month as they lose two key sources of support: the record-low yields in Europe that boosted their relative allure and the prospect of an economic slowdown at home which, traders speculated, pushed back the timing of an interest-rate increase from the Federal Reserve.

The benchmark Treasury yield touched a two-month high on Wednesday, in line with a jump in 10-year German yields to the highest level this year. A private report Wednesday is forecast by economists to show an improvement in hiring. A day earlier, data showed services -- which account for about 90 percent of the world’s largest economy -- grew more than predicted in April.

“U.S. data remains solid, and yesterday we had an upside surprise again,” said Michael Leister, a senior rates strategist at Commerzbank AG in Frankfurt. “We’re at this stage that the market seems very keen to sell off on any positive bits and pieces of data, particularly with the Fed looming. It’s a mix of global and domestic factors” driving yields, he said.

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Benchmark 10-year Treasury yields rose as much as four basis points, or 0.04 percentage point, to 2.23 percent on Wednesday, the highest level since March 9, according to Bloomberg Bond Trader data. The yield was up one basis point at 2.20 percent as of 10:41 a.m. in London, with the price of the 2 percent security due February 2025 at 98 9/32.

Two-year yields were little changed at 0.63 percent, having climbed to the highest since March 18. Germany’s 10-year bund yield touched 0.59 percent, the highest since Dec. 29.

Trading was closed in Tokyo on Wednesday for a holiday.

Companies added 200,000 workers to U.S. payrolls in April, after an 189,000 increase the month before, data from the ADP Research Institute in Roseland, New Jersey will show, according to the median projection of economists surveyed by Bloomberg.

A separate report Friday will show non-farm employment increased by 230,000 workers last month, analysts predicted. That would signal that a hiccup in March, which saw the addition of the fewest jobs since 2013, wasn’t the start of a prolonged deterioration.

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