BOND REPORT: 2-year Treasury Yield Hits Nearly 9-year High

By Sunny Oh Features Dow Jones Newswires

ISM manufacturing index rises to 57.8% in June from 54.9% in May

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Treasury prices extended a multisession selloff on Monday, pushing yields up, with the yield on the 2-year Treasury note hitting an almost nine-year high.

A release of upbeat manufacturing data helped to add to growing pressure on bonds during a holiday-shortened trading session ahead of the Fourth of July.

The 2-year note rose 2.9 basis points to 1.414%, setting a its highest level since Nov. 3, 2008, according to FactSet data (http://www.marketwatch.com/story/bond-selloff-spreads-to-asia-with-japanese-yields-at-multimonth-high-2017-06-30). The yield for the benchmark 10-year Treasury note advanced 5.3 basis points to 2.352%, its highest levels since May 11. The 30-year bond added 3.3 basis points to 2.867%.

Bond prices and yields move inversely.

See: July 4th: Which markets are closed? (http://www.marketwatch.com/story/july-4th-which-markets-are-closed-2017-06-30)

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Yields moved up sharply after the Institute for Supply Management showed its manufacturing index had jumped to 57.8% in June from 54.9% (http://www.marketwatch.com/story/us-manufacturers-growing-at-fastest-pace-in-three-years-ism-finds-2017-07-03), above the 55.6% forecast of economists surveyed by MarketWatch and the fastest pace in almost three years. A reading of 50 indicates an expansion.

The strong showing helped to bolster Wall Street expectations that the Federal Reserve will hike benchmark interest rates at least once more before year-end. Higher interest rates tend to be bearish for U.S. government paper, pushing prices lower and yields higher.

Sluggish inflation data, falling below the Fed's 2% target, had supported a bullish outlook for bond buyers because rising inflation can erode a bond's value.

Also see: The trap ahead for a stock market too full of animal spirits (http://www.marketwatch.com/story/the-trap-ahead-for-a-stock-market-too-full-of-animal-spirits-2017-03-29)

Monday's yield climb extends a selloff in government bonds over the past week that dragged the benchmark Treasury yields 15 basis points higher. European Central Bank and Bank of England policy makers rattled bond markets after they made hawkish statements suggesting an end to easy-money policies, which have been supportive to stock and bond prices, could occur sooner than later.

Read: Global bonds sell off as central banks signal end to easy-money era (http://www.marketwatch.com/story/global-bond-yields-march-higher-as-easy-money-era-shows-age-2017-06-29)

Elsewhere, the 10-year German government bond rose 0.5 basis point to 0.473%.

Looking ahead, bond-market investors will be paying close attention to nonfarm-employment data set for Friday, with data on wage growth offering further clues on inflation. Ahead of that, minutes from the Fed's recent policy-setting meeting are due to be released at 2 p.m. Eastern on Wednesday (http://mam.econoday.com/byshoweventfull.asp?fid=475724&cust=mam).

(END) Dow Jones Newswires

July 03, 2017 15:40 ET (19:40 GMT)