Bonds Swing Lower as Stocks and Data Improve

U.S. Treasuries stumbled Wednesday as equities aimed at record highs while data proved generally improved while a return to risky business drains the safety bid in bonds.

The market pared initial losses with the 30-year recently at 3.052% from a 2.94% low yield./high price overnight and 2.955% close Tuesday. The 10-years is near 2.376% from a high of 2.29% and a close near 2.305%. The five-year is near 1.834% after a 1.7779% high and from 1.78% Tuesday. The two-year is 1.115% having traded 1.083% overnight from a close near 1.10%.

The curve trade saw recent flattening unwound with the yield differential between the two- and 10-years pushed along a steeper slope to near 1.26 plus from 1.20 Tuesday while the five- and 30-year yield spread widened to near 1.22 versus a tighter 1.17.

Treasuries are on course for their worst month since 2009. The 10-year note is the underperformer on the month, with the yield having surged nearly 59 basis points from a low yield/high price of 1.825% on Oct. 31, to 2.404% today. The 30-year, meanwhile, has jumped 11 basis points to 3.05% Wednesday morning versus 2.58% at the end of October. Adding weight to the long end has been an uptick in inflation statistics, and inflation expectations on anticipated government spending, along with gains in oil prices, which ended October at $47.46. Of course the Federal Open Market Committee is also expected to be hiking rates next month, though that’s had more impact on shorter notes.

Data showed Chicago purchasing managers’ index (PMI) surged to the highest level since January 2015. The 216,000 November ADP private payrolls rise beat the 160,000 estimate though there was a big 28,000 downward October ADP revision to 119,000 from 147,000. Personal income climbed 0.6% in October beating the 0.4% expected, with spending up 0.3%, missing the 0.5% consensus. Mortgage applications dropped 9.4% on the week as 30-year fixed rates rose.

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