Treasuries showed a substantial move to the downside during trading on Thursday, resulting in another spike in treasury yields.
Bond prices fell sharply at the start of trading and remained firmly negative throughout the session. As a result, the yield on the benchmark ten-year, which moves opposite of its price, surged up by 8.9 basis points to 1.730 percent.
The ten-year yield soared to its highest closing level since January of 2020, while the thirty-year bond yield reached its highest levels since last summer.
Yields skyrocketed despite yesterday’s assurances by the Federal Reserve that interest rates will remain at near-zero levels through 2023.
Analysts attributed the jump in yields to concerns that the Fed’s apparent willingness to let inflation accelerate more than normal will reduce the appeal of bonds.
In updated projections from Fed members, the forecast for the pace of growth in core consumer prices, which exclude food and energy prices, was upwardly revised to 2.2 percent from 1.8 percent.
The Fed also said core consumer prices are expected to rise by 2.0 percent in 2022 and 2.1 percent in 2023.
The central bank also reiterated that interest rates will remain unchanged until inflation is on track to moderately exceed 2 percent for some time.
In U.S. economic news, the Labor Department released a report showing an unexpected increase in first-time claims for U.S. unemployment benefits in the week ended March 13th.
The report said initial jobless claims climbed to 770,000, an increase of 45,000 from the previous week’s revised level of 725,000.
The rebound came as a surprise to economists, who had expected jobless claims to edge down to 700,000 from the 712,000 originally reported for the previous week.
However, the unexpected increase in jobless claims was partly due to jump in claims in Texas due to the impact of Winter Storm Uri.
A separate report released by the Philadelphia Federal Reserve showed its reading on regional manufacturing activity spiked to a nearly 50-year high in March.
The Philly Fed said its diffusion index for current activity soared to 51.8 in March from 23.1 in February, with a positive reading indicating growth in regional manufacturing activity.
With the substantial increase, the Philly Fed Index skyrocketed to its highest level since hitting 53.6 in April of 1973.
A lack of major U.S. economic data may lead to choppy trading on Friday, although concerns about inflation may continue to weigh on treasuries.