Treasury notes fell for a third straight day on a report showing U.S. economic growth exceeded forecasts last quarter and as global stocks rallied.
Yields reached the highest in more than a week as traders added to bets that the economy is strong enough to convince the Federal Reserve to raise interest rates as soon as next month, even after the recent global market turmoil. Prices fell on notes maturing in two through 10 years.
“The economic data suggest that things are on the right track,” said Thomas Simons, a government-debt economist in New York at Jefferies Group LLC, one of 22 primary dealers that trade with the Fed. “If commodities can stabilize, everything will look right with the world.”
The benchmark two-year yield rose two basis points, or 0.02 percentage point, to 0.69 percent as of 5 p.m. in New York, according to Bloomberg Bond Trader data. The 0.625 percent security due in August 2017 fell 1/32, or 31 cents per $1,000 face amount, to 99 7/8.
The 30-year bond advanced, halting a three-day decline. The prospect of the Fed’s first interest-rate increase in nearly a decade damped expectations for inflation, and can erode longer-maturity bonds’ fixed payments.
Global stocks gained Thursday. China’s government resumed its intervention in its stock markets and has been selling Treasuries this month to raise dollars needed to support the yuan, according to people familiar with the matter.
Traders are pricing in a 53 percent chance of a Fed boost before the end of this year, up from 46 percent two days ago, assuming the benchmark will average 0.375 percent after the first rise.
Seven-year Treasuries pared declines after the government sold $29 billion of the securities at a lower-than-expected yield of 1.93 percent. The security was forecast to draw a yield of 1.934 percent, according to a Bloomberg News survey of eight primary dealers. The bid-to-cover ratio was 2.53, above the average of 2.46 over the past year.
The nation’s gross domestic product rose at a 3.7 percent annualized rate from April to June, exceeding all estimates of economists surveyed by Bloomberg and up from the 2.3 percent rate the Commerce Department reported last month.
“We’re on pretty solid footing here domestically,” said Michael Lorizio, a Boston-based fixed-income trader at Manulife Asset Management, which oversees $302 billion. “Combine that with a risk-on mentality in stocks, and that makes sense” as far as why Treasuries are selling off.