U.S. bond-market slide deepens, pushing yields to two-decade highs

Skip to Content News Archives Economy Energy Oil & Gas Renewables Electric Vehicles Mining Commodities Agriculture Real Estate Mortgages Mortgage Rates Finance Banking Insurance Fintech Cryptocurrency Work Wealth Smart Money Wealth Management Investor Personal Finance Family Finance Retirement Taxes High Net Worth FP Comment Executive Women Puzzmo Newsletters Financial Times Business Essentials More Innovation Information Technology FP500 Podcasts Small Business Lives Told Tails Told Shopping Financial Post Store Obituaries Place a Notice Advertising Advertising With Us Advertising Solutions Postmedia Ad Manager Sponsorship Requests Classifieds Place a Classifieds ad Working Profile Settings My Subscriptions My Offers Newsletters Customer Service FAQ News Economy Energy Mining Real Estate Finance Work Wealth Investor FP Comment Executive Women Puzzmo Newsletters Financial Times Business Essentials This advertisement has not loaded yet, but your article continues below.HomeNewsEconomyU.S. bond-market slide deepens, pushing yields to two-decade highs'Pressure is starting to build up on the short end of the yield curve'Author of the article:Greg Ritchie and Elizabeth StantonThe bond selloff raises the stakes for the Treasury Department’s expanded buyback program, announced in mid-August after long-term yields climbed to multiyear highs. Photo by PrabradyPhoto/Getty ImgaesThe losses in the United States Treasuries market intensified on Wednesday as robust economic data and a weak auction drove yields across most maturities to the highest levels in almost two decades.THIS CONTENT IS RESERVED FOR SUBSCRIBERS ONLYSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman, and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.SUBSCRIBE TO UNLOCK MORE ARTICLESSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.REGISTER / SIGN IN TO UNLOCK MORE ARTICLESCreate an account or sign in to continue with your reading experience.Access articles from across Canada with one account.Share your thoughts and join the conversation in the comments.Enjoy additional articles per month.Get email updates from your favourite authors.THIS ARTICLE IS FREE TO READ REGISTER TO UNLOCK.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one accountShare your thoughts and join the conversation in the commentsEnjoy additional articles per monthGet email updates from your favourite authorsSign In or Create an AccountHigher oil prices sparked the declines earlier in the session, fanning worries around elevated inflation and punishing European government debt as well. Releases showing stronger-than-forecast U.S. manufacturing and services activity accelerated the slide, which then picked up speed as a five-year Treasury auction drew surprisingly dim demand.The auction results pushed the yield on five-year U.S. notes above five per cent for the first time since 2007, leaving the two- and three-year maturities the only coupon-bearing tenors below that milestone level. Thirty-year yields surged closer to their highest since 2004. The selloff spilled over into stocks, with the S&P 500 Index dropping almost one per cent at one point.SUBSCRIBER EXCLUSIVE: FP West: Energy Insider brings you behind the oilpatch’s closed doors with exclusive insights from insiders every Wednesday morning.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of FP West: Energy Insider will soon be in your inbox.We encountered an issue signing you up. Please try again“You don’t want to step in front of the freight train today,” said Sean Simko, head of fixed-income investment management at SEI Investments. “You’re seeing the trifecta — stronger economic data, supply pushing the five-year to levels we haven’t seen in years and the view that inflation is sticky globally.”The economic data and the jump in oil prices amid the standoff in the Middle East led traders to boost bets on further Federal Reserve policy tightening. Officials lifted borrowing costs last week for the first time in three years, to a range of 3.75 per cent to four per cent, a move Chairman Kevin Warsh said removed a “dose of accommodation.”Swaps now fully reflect three quarter-point hikes over the next year, with significant hedging for a fourth increase. If realized, that would take the central bank’s target rate into a range of 4.75 per cent to five per cent.“Pressure is starting to build up on the short end of the yield curve,” said Christophe Boucher, CIO of ABN AMRO Investment Solutions. Wednesday’s economic data will allow the Fed to “double down” on its hawkish stance, he said.Weak AuctionThe early bond losses set the stage for the afternoon’s US$70 billion five-year sale, which came in at the highest auction yield since 2006.The 5.033 per cent yield required to clear the auction was more than three basis points above the expected level ahead of the bidding deadline. By that measure it was the second-worst five-year auction in data recorded since 2018, exceeded only by the result in June 2022 after the first of the Fed’s several jumbo 75 basis point rate hikes.The rate on the maturity surged as much as 20 basis points on Wednesday. The yield surpassed the high of 4.99 per cent seen in 2023, at the peak of the Fed’s hiking cycle to tame surging inflation.Meanwhile, the benchmark 10-year rate rose almost 17 basis points to 5.13 per cent, the highest since 2007. The 30-year yield traded at about 5.4 per cent, the highest since 2007, and within about 4 basis points of the highest level since 2004.This advertisement has not loaded yet.This advertisement has not loaded yet, but your article continues below.Policymakers have become increasingly worried about inflation that hasn’t retreated to their two per cent target in five and a half years, with some warning of price pressures that appear to be persistent as international tensions keep energy prices elevated. That’s against the backdrop of a robust U.S. labour market.The bond selloff raises the stakes for the Treasury Department’s expanded buyback program, announced in mid-August after long-term yields climbed to multiyear highs that have since been exceeded. The second operation under the expansion, targeting debt maturing in 20 to 30 years, is set for Thursday.Benchmark 20- and 30-year yields added to their climb after the announcement that the buyback target — which officials previously had said would at least double to US$4 billion — would be US$6 billion, the same as the first expanded operation on Sept. 10.—With assistance from Ye Xie, Michael MacKenzie and Edward Bolingbroke.We apologize, but this video has failed to load.Notice for the Postmedia NetworkThis website uses cookies to personalize your content (including ads), and allows us to analyze our traffic. Read more about cookies here. By continuing to use our site, you agree to our Terms of Use and Privacy Policy.