Rates are surging with 10-year, 30-year Treasury yields touching multiyear highs

Futures Now: Treasury yields surge
Futures Now: Treasury yields surge

The yield on the 10-year Treasury note hit its highest level since July 2011 and the yield on the 30-year Treasury bond hit its highest level since October 2014 on Wednesday after new data fostered views of a booming economy.

Private companies added 230,000 more positions in September, according to ADP and Moody's Analytics, the best gain since February and well ahead of the 168,000 jobs added in August.

The U.S. services sector, meanwhile, expanded in September at its fastest pace on record, according to the Institute for Supply Management.

The ISM non-manufacturing index rose to 61.6 last month, its highest level since the index was created in 2008. Economists polled by Refinitiv projected the index to hit 58 last month.

The healthy economic reports preceding the sustained uptick in yields, with benchmark rates hitting multiyear highs.

The yield on the 30-year Treasury bond hit its highest level since Oct. 3, 2014, and was last seen at 3.309 percent.

The yield on the benchmark 10-year Treasury note also jumped and was at 3.157 percent at 3:59 p.m. ET, down from 2011 highs hit earlier in the session.

"The U.S. economy is strong; there's just no other way to frame it," said Nathan Sheets, chief economist at PGIM Fixed Income.

"The economy is strong, growth is strong, inflation is gradually moving up as the Fed projects. And the reality is the U.S. Treasury will be doing a lot of issuing over the next few years, which all put upward pressure on rates in the near term," he said.

10-year Treasury yield hits seven-year high
10-year Treasury yield hits seven-year high

The 10-year rate is especially important given its role in helping set rates for a whole range of business and consumer loans, including home mortgages.

The rate on the two-year note hit 2.864 percent, its highest point since June 25, 2008. Bond yields move inversely to prices.

The Labor Department's monthly update on the employment situation is due Friday at 8:30 a.m. ET.


Investors around the globe are monitoring recent trade developments, after Canada agreed to a new trade deal with the U.S. and Mexico on Sunday.

While the United States-Mexico-Canada Agreement has lifted market sentiment, investors remain on edge over the ongoing trade spat between the U.S. and China.

"What you're seeing is the front end of the curve coming up as the probability of the Fed continuing their rate hike cycle rises. The belly and back end likely have to do with the strong economic data," said Jon Hill, rates strategist at BMO Capital Markets.

"ISM Manufacturing this morning showed a record for the series in the employment category, pushing out expectations for economic growth," he added.

Hill said, however, that the current economic optimism may be only transient and tied to one-time stimuli like President Donald Trump's tax cuts.