(Bloomberg) -- US bond yields rose Thursday as a strong labor-market indicator eroded confidence in the outlook for more big Federal Reserve interest-rate cuts, drawing investors to the Treasury’s last debt auction of the week.
The yield increases were biggest for short maturities, which are more sensitive than longer-dated ones to changes in the Fed’s rate. The two-year yield rose as much as 6 basis points to 3.62% and the 10-year advanced to 3.82%, the highest since Sept. 4.
A $44 billion seven-year note auction was met with strong demand, luring a yield of 3.668% versus 3.675%, the when-issued yield at the 1 p.m. New York time bidding deadline. Sales of two- and five-year Treasuries earlier in the week drew yields in line with the expected results.
The move to higher yields accelerated after applications for US unemployment benefits fell to a four-month low, remaining muted despite a recent slowdown in hiring. Other economic data released Thursday showed the economy expanded at a 3% pace in the second quarter of this year, avoiding an expected slight downward revision.
Market participants have been watching economic indicators to discern whether the Fed will opt for another half-point rate cut to follow their Sept. 18 move. Traders are pricing in about 37 basis points worth of easing by the end of November, implying a solid chance of that outcome.
Several Fed officials are speaking at the US Treasury Market conference in New York on Thursday. New York Fed President John Williams at the event announced the formation of a body of private market participants to monitor the use of interest-rate benchmarks, or reference rates, across financial markets.
Michael Barr, the Fed’s vice chair for supervision, meanwhile, said the central bank is exploring adjustments to its liquidity framework, including requirements that would seek to protect uninsured depositors.
(Updates with pricing, auction results throughout.)
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