Treasury yields bounced off intraday lows Thursday, but remain lower for the week after a combination of robust economic data and a stock-market surge helped to derail the bond market’s morning rally.
The 10-year Treasury note yield TMUBMUSD10Y, +0.35% was virtually unchanged at 2.537%, carving out its lowest finish in fifteen months. Earlier, the 10-year yield scraped the 2.5% level.
The 2-year note yield TMUBMUSD02Y, +0.85% rose 0.8 basis point to 2.411%, while the 30-year bond yield TMUBMUSD30Y, -0.07% ticked lower by 1.3 basis points to 2.963%, a three-month low. Bond prices move in the opposite direction of yields.
See: Fed jettisons 2019 rate-hike plans as economy slows and inflation softens
Bonds rallied Wednesday after Federal Reserve policy makers signaled no rate hikes are expected in 2019 and cut their economic forecasts. Yields fell and the yield curve — measured by spreads between short- and long-dated maturities — flattened.
Read: The most accurate recession indicator is closer to flashing red after the Fed’s ‘dovish double-down’
On Thursday, a strong stock-market rally led by tech stocks helped draw investors away from haven assets like U.S. government paper, sending yields higher. The S&P 500 SPX, +1.09% and Nasdaq Composite COMP, +1.42% were on track to finish higher by 1%.
The bond-market also drew strength from two pieces of stronger-than-expected economic data on Thursday, which pushed back against pessimistic interpretations of the Federal Reserve’s March policy update. Improved growth expectations can lift bond yields through increased inflation, a corrosive influence on a bond’s fixed-income payments.
Analysts said the overwhelming dovish message sent out by the central bank’s decision to slash its interest-rate projections from two hikes to none underlined the worrisome growth backdrop.
Jobless claims for the week ending in March 16 showed a fall of claims by 9,000 to 221,000, the government said Thursday, with economists surveyed by MarketWatch forecasting a read of 225,000. Meanwhile, a reading of manufacturing in the Philadelphia business area, the Philadelphia Fed business activity index, rebounded in March to a seasonally adjusted reading of 13.7 from—4.1 in the prior month.
“The Fed essentially threw in the towel yesterday on the economy and monetary policy, and sure enough, the next two data points, admittedly not exactly top-tier indicators, were stronger than expected,” said Stephen Stanley, chief economist for Amherst Pierpont Securities, in a Thursday note.
Elsewhere, the Bank of England unanimously voted to keep interest rates unchanged at 0.75%, though it said “gradual tightening” may be needed in the future. Analysts say uncertainty around Britain’s path to leave the European Union have paralyzed the central bank, preventing it from carrying out further rate moves.
European bonds continued to digest the worrisome implications of an economic backdrop that has prompted central banks around the world to stand pat. The 10-year German government bond yield TMBMKDE-10Y, -50.12% fell nearly 4 basis points to 0.04%, while the 10-year U.K. government bond yield TMBMKGB-10Y, -7.82% slipped around 9 basis points to 1.06%.
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