Yield on 2-year Treasury logs biggest jump in five weeks after strong U.S. GDP report

By Joy Wiltermuth and Jamie Chisholm

The 10-year Treasury yield ends at highest since early September

U.S. government bond yields finished mostly higher Thursday, with the 2-year Treasury seeing its biggest daily yield gain in five weeks and the benchmark 10-year Treasury rate ending at its highest level since early September.

Investors were digesting fresh economic data, included a revised reading of second-quarter U.S. economic growth, showing that the economy remains in pretty good shape.

What's happening

The yield on the 2-year Treasury BX:TMUBMUSD02Y jumped 6.8 basis points to 3.620%, its biggest daily yield jump since Aug. 22, according to Dow Jones Market Data.The yield on the 10-year Treasury BX:TMUBMUSD10Y added almost 1 basis point to 3.788%, its highest level since Sept. 3.The yield on the 30-year Treasury BX:TMUBMUSD30Y fell 2 basis points to 4.122%.

What's driving markets

Treasury yields mostly climbed Thursday after a wave of economic data pointing to resilience in the economy. The focus now turns to Friday's personal consumption expenditure price index for August, the Federal Reserve's favored inflation gauge.

In Thursday data, U.S. gross domestic product was unchanged from the prior 3% estimate, driven by government and consumer spending.

Orders for U.S. durable goods were flat in August but better than the retreat expected on Wall Street. Jobless claims fell to a four-month low, underscoring a trend of employers hesitant to hire or fire employees.

"Revised [second-quarter] GDP data is old news but puts a nice bow on the economic data for the first half of the year," Jim Baird, chief investment officer at Plante Moran Financial Advisors, said in emailed comments.

Related: Why stock-market investors are freaking out over economic data they used to ignore

Following Thursday morning's economic data, traders were pricing in a 49.3% probability that the Fed will cut interest rates by 50 basis points from the current range of 4.75% to 5% after its next meeting on Nov. 7, according to the CME FedWatch Tool. In early action, that probability was closer to 62%.

What's happening

"With Friday's key inflation reading around the corner, the market is leaning toward a cooler, subtrend print," said Stephen Innes, managing partner at SPI Asset Management.

"But here's the nagging question: Is there enough slack in the economy for inflation to slide down to the Fed's 2% target, or will this growth surge send inflation spiraling back into the spotlight? The Fed has thrown the economy a lifeline, but we'll see if it comes with some inflationary baggage down the road," he said.

-Joy Wiltermuth -Jamie Chisholm

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09-26-24 1600ET

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