US 10-year yields cross 3 percent

Reuters with
Futures Now: 10-year hits 3%

U.S. benchmark Treasury yields edged higher on Thursday, touching their two-year high of 3 percent, in light trading as most investors stayed out of the market after the Christmas holiday.

On light trading volume, benchmark 10-year Treasury notes yielded 3.002 percent in the morning, but ticked lower to 2.994 percent in the afternoon. Yields extended their climb after U.S. jobless claims fell to their lowest in nearly a month, stoking new speculation abut the strength of the recovery.

"Three-point-five percent is probably fair value, or where the 10-year should be, as it tends to track nominal GDP over time," said Jack Ablin, chief investment officer at BMO Private Bank. "The question is, can the stock market overcome that head wind, or the battle between accelerating top-line growth and accelerating interest rates."

Thirty-year bond yields edged higher, yielding 3.926 percent.

U.S. Treasurys

Prior to the Christmas holiday, traders sent yields to their highest levels in three months, as worries percolated over when the Federal Reserve might hike interest rates. Although the Fed has promised to keep rates low for longer, the central bank's decision to scale back its massive bond-buying purchases has churned the market.

Playing in the background is a run of stronger-than-expected data. Tuesday's durable goods report dovetailed with other encouraging indicators and raised the risk that the Fed could step up its schedule to reduce its crisis-era monetary stimulus.

The yield gap between five-year and 30-year Treasurys, which is seen as gauge of traders' view on changes in the Fed's interest rate policy and its bond purchase program, widened to 2.16 percent from Monday's 2.15 percent, which was its tightest level since September.

—Reuters with