Treasury 10-year yields touched the highest since December as euro-area government bonds extended a slump that has wiped out about $436 billion in global fixed-income markets over the past week.
U.S. securities earlier extended their drop from Wednesday, which came as Federal Reserve Chair Janet Yellen said yields “could see a sharp jump” when officials raise the benchmark interest rate for the first time since 2006. Data on Friday will show jobs growth was back on track last month, according to a Bloomberg survey of economists. U.S. 10-year yields are the lowest relative to their German counterparts in more than three months, even after Yellen suggested they were too low.
“It’s Europe dragging everybody else higher in yields right now,” said Barra Sheridan, a rates trader at Bank of Montreal in London. “In this selloff, Treasuries have outperformed bunds. We are at crucial levels in these markets.”
Benchmark Treasury 10-year yields were little changed at 2.24 percent as of 7:13 a.m. New York time, according to Bloomberg Bond Trader data. The price of the 2 percent note due February 2025 was 97 29/32.
The yield climbed to 2.31 percent earlier Thursday, the most since Dec. 8. Germany’s 10-year bund yield jumped as much as 19 basis points to 0.78 percent, also the highest since Dec. 8.
That narrowed the extra yield, or spread, that investors get for holding the U.S. 10-year notes instead of German bunds to 157 basis points, the least since Feb. 5 based on closing-price data compiled by Bloomberg. The spread was 190 basis points on March 11.
Treasuries lost 1.1 percent this month through Wednesday, outperforming their euro-area peers, which handed investors a 2.3 percent loss, according to Bloomberg World Bond Indexes. While Treasuries reflect skepticism that the economic recovery will be strong enough to enable the Fed to raise interest rates as early as September, investors in European bonds are rebelling against price increases that pushed yields to record lows.
“People are underestimating the risk that the U.S. will recover and at the same time the market in Europe is suffering from illiquidity and technical selling,” Ciaran O’Hagan, head of European rates strategy at at Societe Generale SA in Paris, said of the yield spread. “I’d expect the U.S. economy to improve considerably, justifying a rate hike in September.”
A report Friday will show nonfarm employment increased by 230,000 workers last month, analysts predicted. That would show that a hiccup in March, which saw the addition of the fewest jobs since 2013, wasn’t the start of a prolonged deterioration.
The number of claims for first-time jobless benefits increased last week, adding to the mixed signals on the health of the job market, a Bloomberg survey showed before a release on Thursday.