U.S. Treasury Yields Rise After Positive Economic Reports

U.S. Treasury yields climbed to near the top of their recent range Wednesday after better-than-expected data on job losses and the services sector boosted investors' optimism about an economic rebound.

The yield on the benchmark 10-year U.S. Treasury note rose to 0.761% by market close, its highest level since early April, according to Tradeweb, up from 0.679% at Tuesday's close. The 30-year yield rose to 1.551%, from 1.478% Tuesday. Yields rise when bond prices fall.

The climb came after a report by the ADP Research Institute showed private sector employment in the U.S. decreased by 2.76 million jobs from April to May, beating analysts' expectations. The rise continued after the Institute for Supply Management said its nonmanufacturing index, which tracks a range of U.S. sectors such as health care, finance and agriculture, also came in better than expected.

Wednesday's data boosted investors' hopes that the U.S. economy is improving as coronavirus infections fall and restrictions on public gatherings ease. Meanwhile investors are anticipating added stimulus measures, with President Trump planning to meet with senior advisers as soon as this week to discuss options for the next coronavirus relief package as the administration prepares for negotiations with Congress.

Some investors said the government's plans to sell more longer-term bonds in coming weeks was also pushing yields higher. In one sign that the increased supply of debt was hitting bonds with longer maturities, the gap between the five-year and 30-year Treasury yield increased to 1.175 percentage points early Wednesday, the widest since February 2017.

The difference between the two has widened even as the gap between three-month and 10-year yields has remained steady. Federal Reserve policy and Treasury supply are driving the move.

"There's a ton of long-term bond supply pending," said Gennadiy Goldberg, senior U.S. rates strategist at TD Securities. "There's almost no upcoming weeks where you don't get long-end bond supply in the U.S."

On Thursday, the Treasury will announce the supply of 3-year, 10-year and 30-year government bonds to be auctioned next week, which Mr. Goldberg says may cause the dispersion between yields on shorter-term bonds and those on longer- term debt -- known as the yield curve -- to steepen further.

Some analysts have suggested that the recent yield curve steepening is being driven in part due to the Fed pulling back from its Treasury purchases. In March, the central bank was buying $75 billion of Treasurys a day. This week, the Fed is buying a total of just $22.5 billion in bonds.

Write to Sebastian Pellejero at sebastian.pellejero@wsj.com


  (END) Dow Jones Newswires
  06-03-20 1612ET
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