LONDON, Jan 30 (Reuters) - U.S. Treasury yields rose to a nine-month high on Wednesday as a break above 2 percent in 10-year yields spurred a new round of selling ahead of the conclusion of the Federal Reserve’s latest meeting and key data.
As the recent resurgence in appetite for riskier assets grew stronger in Asian trading, the decisive break by 10-year Treasury yield above this closely watched level triggered a wave of selling when European markets opened.
“It’s been very busy morning. Once we broke through 2 percent on 10s it seemed like it sparked another round. This is coming from real money accounts here,” a trader said, referring to long-term investors rather than short-term speculators.
The selloff took 10-year yields to a peak of 2.035 percent with traders eyeing next resistance at 2.07 percent - a level which capped the yield during early 2012.
“It’s a global shift away from safer assets to more risky assets as the worst-case scenario for the world economy seems to be avoided, particularly in Europe,” said Nick Stamenkovic, strategist at RIA Capital Markets
“The price action suggests that the market is selling on strength rather than buying on weakness which is a reflection of deteriorating sentiment towards Treasuries.”
Treasury futures were 6/32 lower at 131, matching a similar-sized fall in German Bunds.
The near-term outlook is dominated by the outcome later in the day of the Federal Reserve’s policy meeting. The Fed is not expected to unveil new policy measures, but its pronouncements will be scrutinised for any indication of when loose monetary policy could end.
“Anything that is going to push up expectations of when the end of quantitative easing happens is going to be a bearish event,” the trader said, adding that such signals could send Treasury yields as high as 2.15 percent.
Beyond that, U.S. jobs data due on Friday will help to shape investors’ perception of how strong growth is in the U.S. economy. The current upbeat sentiment left markets vulnerable to a worse than expected figure, which could check the rise in yields, analysts said.