NEW YORK: US Treasury yields rose in choppy trading on Friday as investors bet the US economy is strong enough for the Federal Reserve to raise interest rates this year and after the European Central Bank president said he did not anticipate more rate cuts.
ECB President Mario Draghi unleashed a bold easing package on Thursday, cutting rates and expanding asset buys, but prompted criticism that after disappointing markets by under-delivering in December, he had again botched communications.
Treasury yields rose as Draghi spoke on Thursday and continued to climb throughout the day and into Friday morning.
The US government debt market was seen as following a jump in European yields, which were higher as the euro rallied on the ECB plan. More monetary stimulus would be expected to keep yields lower.
“What Draghi said yesterday about no more rate hikes drove yields yesterday and overnight,” said Justin Lederer, an interest rate strategist at Cantor Fitzgerald in New York.
“It’s also caused some people to project that the Fed could raise rates again in April or June.”
As recently as two weeks ago, investors and traders priced out any rate rise by the Federal Reserve this year.
They currently expect one, according to an analysis of fed funds futures by the CME Group.
While economic data on Friday showed that import prices fell for the eighth consecutive month, driven by declining costs for petroleum, investors were upbeat about the state of the US economy.
Traders were cautious about making major bets as they looked to a two-day Federal Reserve meeting beginning on March 15, which is expected to provide clues about when the US central bank may raise interest rates again.
Yields on the two-year and three-year Treasury notes climbed to their highest in six weeks, with the two-year touching 0.964 percent and the 3-year yield reaching 1.159 percent.
Five- and 7-year note yields rose to their highest since the end of January.
The benchmark 10-year note yield rose to 1.970 percent, its highest in six weeks. It was last down 10/32 in price to yield 1.963 percent, up from 1.929 on Thursday.
The 30-year bond was last down 13/32 in price to yield 2.721 percent, up from 2.70 percent late on Thursday.
Copyright Reuters, 2016
Courtesy : BRecorder