U.S. government debt yields rebounded to near four-year highs Thursday as central bank moves and strong jobs data both goaded interest rates higher.
The surge in rates, however, was quickly followed by another major sell-off in equities, sending yields from their highs as investors fled for safe havens like Treasurys.
The 10-year yield nearly surpassed a 4-year high of 2.885 percent Thursday morning New York time, a level that helped trigger a global sell-off in equity markets on Monday. The 30-year bond yield hit a high of 3.168 percent, its highest level since March 15, when the 30-year yielded as high as 3.177 percent.
The yield on the benchmark 10-year Treasury note was largely unchanged at 2.835 percent at 4:08 p.m. ET, while the yield on the 30-year Treasury bond was also flat at 3.134 percent. Bond yields move inversely to prices.
Treasurys
A central banking announcement was the first major hit to debt prices on Thursday. The Bank of England (BOE) held rates steady, but said that it might need to hike rates faster and more frequently than previously expected to keep inflation in check.
The BOE explained that if the economy were to follow its February report projections, "monetary policy would need to be tightened somewhat earlier and by a somewhat greater extent over the forecast period," than anticipated during its last report.
"What the market is worried about is not that we're going to get inflation, it's that it's going to get enough of it that we're going to have to reverse the central bank easing that we've had over the last 10 years," said Jim Bianco, head of the Chicago-based advisory firm Bianco Research. "Not tomorrow, but it's coming."
Jobless claims also gave yields a lift early in the day, joining a growing list of strong economic news that's keeping investors worried about an overheating economy. The number of Americans filing for unemployment benefits unexpectedly fell last week, dropping to its lowest level in nearly 45 years.
Initial claims for state unemployment decreased 9,000 to an adjusted 221,000 for the week ended Feb. 3, according to the Labor Department.
In equity markets, volatile trading continued to be seen across markets worldwide. The Dow Jones industrial average closed down more than 1,000 points following the morning's rise in rates, while the S&P 500 fell 3.75 percent. Both indexes are now officially in correction territory, down more than 10 percent from their 52-week highs.
For the S&P 500, it is its third drop of greater than 2 percent in the last five days.
The Treasury Department auctioned $16 billion in 30-year bonds at a high yield of 3.121 percent. The bid-to-cover ratio, an indicator of demand, was 2.26. Indirect bidders, which include major central banks, were awarded 61.2 percent. Direct bidders, which includes domestic money managers, bought 8.1 percent.
U.S. congressional leaders arrived at a two-year budget deal on Wednesday, in order to raise spending on military and domestic areas by close to $300 billion.
President Donald Trump showed approval of the deal, tweeting that the agreement was "so important for our great military," adding that both major political parties "must support" the troops and therefore the bill.