Treasuries Tumble, Driving Two-Year Yield to Highest Since 2009

  • Market-implied odds of March Fed rate increase near 70%
  • Benchmark 10-, 30-year yields top 50-day moving averages

Treasuries tumbled, extending a slide sparked by hawkish comments Tuesday from New York Federal Reserve President William Dudley and San Francisco Fed President John Williams that sent expectations for a March rate hike surging.

Yields were up by two to seven basis points as of 3:18 p.m. in New York. The two-year yield climbed as much as 4.4 basis points to 1.304 percent, reaching the highest on an intraday basis since 2009 and eclipsing its 2016 peak of 1.30 percent. Longer-dated yields remained confined to recent ranges, indicating little change in the number of increases expected by year-end.

  • UST 10Y and 30Y yields topped 50-DMAs for first time since Feb. 22; 30Y topped 3%
  • With 10Y yield’s rebound from YTD low close at 2.312% on Feb. 24, strategists are assessing whether it can overcome resistance at 2.50%, a level it hasn’t closed above since Jan. 26; a move above the level would be “a more thematic change,” BMO strategist Aaron Kohli said in note
  • Bearish catalysts also included fading of month-end bid and modulated tone of Trump’s address to Congress; administration’s failure to reach agreement with congressional Republicans on tax cuts and budget principles helped drive gains for Treasuries in February 
  • UST yields held near session highs amid gains for U.S. stocks that pushed benchmarks to new records
  • Reaction to U.S. economic data was limited; January personal income and spending metrics were close to estimates, while February ISM Manufacturing rose more than forecast to highest since August 2014
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