Benchmark U.S. Treasurys yields jumped to two-year highs on Thursday as encouraging jobless claims data reinforced the view that the Federal Reserve is close to scaling back its bond purchases, spurring investors to reduce their debt holdings.
The bond market selloff intensified as investors who had bet that yields would fall after last week's supply were forced to exit those bullish positions, analysts said.
The total number of Americans filing for unemployment benefits for the first time last week fell to a near six-year low, the U.S. Labor Department said on Thursday. The figure suggested a moderate pace of job growth remains in place, which might be enough to allow the U.S. central bank to shrink their $85 billion monthly purchases of Treasurys and mortgage-backed securities as early as September, traders and analysts said.
Despite more evidence of healing in the labor market, the latest pop in yields fed worries about higher mortgage rates and other long-term borrowing costs, which might hamper a still uneven economic recovery, analysts said.
"The data continues to improve and impress the marketplace, and I think the data will continue in this direction," said Charles Comiskey, head of Treasurys trading at Bank of Nova Scotia in New York.
"Then the question becomes not whether they are going to taper in September, but how much they will taper."
The 10-year yield touched 2.823 percent shortly after the weekly claims data before it retreated on a steady pace of bargain-hunting and buying to exit short positions, analysts and traders said.
The losses on Wall Street stocks revived some safe-haven bids for bonds. "We had a one-way down market in stocks which allowed for some pretty retracement in fixed income," said Alex Manzara, vice president of TJM Futures in Chicago.