Treasury Yields Rise Following Strong Economic Data and Fed Comments

Treasury yields traded higher on Wednesday as new services and manufacturing sector data increased worry of further Federal Reserve rate hikes.

The 2-year Treasury note yield jumped 8 basis points to 4.464%. The benchmark 10-year Treasury note yield popped 7% to move back above the key 5% level. The 30-year Treasury yield gained more than 4 basis point to 5.347%.

One basis point is equal to 0.01%, and yields and prices move in opposite directions.

The S&P Global services PMI jumped to 58.7 in September, its highest level in nearly five years, from 56.5 in August. Its manufacturing counterpart also raced to 56.7, a level not seen in more than four years.

"US business continues to boom," S&P Global Market Intelligence chief business economist Chris Williamson said in a statement. "To put the growth surge in context, barring the spike in demand following the opening up of the economy after the COVID-19 lockdowns, the latest improvement in business activity is the greatest recorded since early 2015. Business is clearly booming now in both manufacturing and services."

However, "input costs have meanwhile jumped in September at the steepest rate for four years, with fuel and transport costs spiking higher thanks to the rise in oil prices," he added.

Adding to the move higher in yields were comments made by Michael Barr. The Fed governor said further rate hikes are likely necessary as "risks to achieving our inflation target have increased."

The Fed hiked its overnight benchmark rate last week, as rising energy prices have led to persistently elevated inflation readings.