10-, 30-year Treasury bonds post biggest 2-day losses in years

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Long-dated Treasurys finished Monday with their biggest two-day losses since 2020 and 2022, after a batch of strong U.S. economic data and Federal Reserve Chair Jerome Powell’s weekend comments about the need to “carefully” approach the timing of interest-rate cuts.

What happened

  • The yield on the 2-year Treasury
    rose 10.2 basis points to an almost two-month high of 4.470%, from 4.368% on Friday. It has jumped 27.6 basis points over the past two trading sessions, the biggest two-day advance since May of last year, according to 3 p.m. Eastern time figures from Dow Jones Market Data. Yields move in the opposite direction to prices.

  • The yield on the 10-year Treasury
    climbed 13.3 basis points to 4.163%, from 4.030% on Friday. It’s up by 30.1 basis points in the past two sessions, the biggest two-day jump since June 2022.

  • The yield on the 30-year Treasury
    rose 11.9 basis points to 4.345%, from 4.226% on Friday. It has climbed 24.3 basis points in the past two sessions, the biggest two-day advance since March 2020.

  • Ten- and 30-year rates finished Monday at their highest levels since Jan. 24 and Jan. 26, respectively.

What drove markets

Federal Reserve Chair Jerome Powell used an appearance on “60 Minutes” on Sunday to push back again on the idea the central bank would cut rates in March. He said that U.S. economic strength is enabling the Fed to be “careful” about deciding when to cut interest rates.

In data released on Monday, S&P Global’s U.S. services purchasing-managers index revealed that business activity growth accelerated to a seven-month high in January. It came in at 52.5 for last month, up from 51.4 in December. The rate of growth accelerated for the fourth month running to the fastest since last June.

Separately, the Institute for Supply Management’s manufacturing-activity index rose to 49.1% in January from 47.1% in the prior month, but remained in contractionary territory. ISM’s services-sector reading climbed to 53.4% versus 50.5% in December.

Meanwhile, investors also continued to react to January’s surprising 353,000 surge in nonfarm payrolls, based on data released last Friday. Economists at Barclays said that although some of the key numbers should be interpreted with caution, upside risks to the Fed’s interest-rate path are intensifying.

Read: Bond-market selloff driven by ‘higher for longer’ fears are leading to worst two-day losses in months

What strategists are saying

“Powell used his ’60 Minutes’ interview as an opportunity to push back further on March rate cut expectations,” said BMO Capital Markets strategists Ian Lyngen and Vail Hartman.

“While we’re sympathetic to investors’ eagerness to bring forward rate cuts, it was clearly too soon — at least from Powell’s perspective,” they wrote in a note. “Friday’s employment report makes it difficult to argue that the real economy is facing mounting headwinds.”

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