Bond Report: 30-year U.S. Treasury yield books biggest quarterly climb since 2009


U.S. Treasury yields lacked direction on Wednesday as investors focused on the Biden administration’s infrastructure package, after seeing data on a sharp increase in private-sector employment in March amid growing optimism around the economy’s health.

The muted trading, however, caps one of the biggest quarterly yield increases in years for long-term government bonds.

What are Treasurys doing?

The 10-year Treasury note yield

rose 2.5 basis points to 1.749%, leaving it up 29 basis points in March and 94 basis points this quarter, marking its biggest such gain since the fourth quarter of 2016.

The 2-year note rate

edged a basis point higher to 0.158%, contributing to a 1.3 basis point increase this month and a 3.9 basis point rise this quarter. The 30-year bond yield

slid 1.4 basis points to 2.382%, but moving up 24.1 basis points in March and 78.6 basis points this quarter. That marks its biggest quarterly increase since early 2009. Bond prices move inversely to yields.

What’s driving Treasurys?

Wednesday turned out to be a quiet session for bonds, ending a turbulent three months that has seen the 10-year Treasury note record its worst quarter since 2016.

Throughout this year, bondholders have contended with an array of threats: a wave of new Treasury debt to fund fiscal stimulus checks, along with a sharp boost in economic growth and inflation expectations as the White House pushed through a $1.9 trillion coronavirus relief package.

Now the Biden administration’s $2 trillion infrastructure plan will be closely scrutinized. The first phase of his “Build Back Better” package will be announced Wednesday afternoon, and will funnel spending into transportation, public health systems and innovation research.

In U.S. economic data, the March employment report from Automatic Data Processing Inc. showed private-sector payrolls grew by 517,000 in March. Pending home sales index for February slid 10.6%.

What did market participants say?

“The upside from the longer-term projects required to refresh some of the aging roads and bridges in the US will be a net add to economic expectations in the coming years, as well as contribute to the process of reengaging sidelined workers as the pandemic comes to its end – sooner rather than later,” said Ian Lyngen, head of U.S. rates strategy at BMO Capital Markets.

“That said, it doesn’t have the immediacy for real GDP as direct stimulus did. Nonetheless, as yet another touchstone for the reflationists, it is difficult to argue with the logic,” said Lyngen.

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