U.S. Treasury yields tick higher as global bond rout slows

The benchmark 10-year Treasury note was up more than 2 basis points to 5.183% after reaching its highest rate since June 2007 on Thursday. The 30-year Treasury bond was higher by more than 1 basis point at 5.476% after surging to levels not seen since 2004. The 2-year note yield was up less than 1 basis point at 4.901%.

One basis point is equal to 0.01%, and yields and prices move in opposite directions.

Treasury yields have been driven higher by hawkish comments from Federal Reserve Governor Michael Barr, who said in a speech on Wednesday that “further policy adjustments” can be expected to bring inflation down to target. Other factors included stubbornly high oil prices and the purchasing managers’ index report hitting its highest level in more than four years.

Traders were last pricing in a 66% chance of a rate hike in October, according to the CME FedWatch tool.

On Friday, the Commerce Department reported that durable goods orders in August were relatively unchanged. Economists polled by Dow Jones had expected a decline of 0.3%.

“Ahead, we think that there are enough rate hike fears discounted at this juncture, and certainly enough to take care of perceived inflation risks,” ING’s regional head of research for the Americas Padhraic Garvey and senior rates strategist Benjamin Schroeder wrote in a note on Friday.

“But, government bond yields are primed to remain under pressure on a pure debt dynamic theory, which translates into pressure for some re-widening in swap spreads, and especially in the 10yr area.”