U.S. Treasury Yields Climb Again Amid Positive Economic Reports

Yields on U.S. Treasuries jumped again Wednesday as a sharp decline in weekly jobless claims and improving consumer sentiment boosted investors’ burgeoning hopes that U.S. economic recovery may not be far off.

It was the eighth time in nine trading sessions that Treasury yields--which move in the opposite direction of the securities’ prices--have risen, continuing the bond market slump that began two weeks ago. On Wednesday, the yield on the benchmark 10-year Treasury note--a key indicator of home mortgage rates--climbed briefly above 5% for the first time since Aug. 15.

But late buying ahead of the Thanksgiving holiday today helped bonds close above the day’s lows.

The 10-year note closed at 4.95%, up from 4.87% on Tuesday and well above its Nov. 7 low of 4.18%. The five-year Treasury note yield closed at 4.31%, the highest since Sept. 10, the day before the terrorist attacks sparked massive buying of safe-haven government securities. Two-year yields rose to 3.07%, up from 2.94% on Tuesday, the highest since Sept. 11.

Yields on 30-year bonds rose briefly to highs not seen since Oct.12, rates predating the Treasury’s surprise announcement Oct. 31 that it would no longer issue the securities. The 30-year yield closed at 5.35%, up from 5.31% on Tuesday.

“It’s pretty much the same story in the market: signs that the economy may have seen its worst, combined with the feeling that the Federal Reserve might be finished up with its easing cycle,” said Kim Rupert, economist at Standard & Poor’s MMS.

Better-than-expected economic data, including recent jobless claims and retail sales, have fed investor hopes for a U.S. recovery. Last week, that optimism, twinned with progress in the war in Afghanistan, saw Treasury yields leap as bonds suffered one of their biggest one-week price declines in two decades.

The Labor Department reported weekly claims for unemployment benefits fell for the fourth consecutive week, sliding to 427,000 in the week ended Nov. 17 from a revised 442,000 the previous week.

A slight improvement in the University of Michigan’s consumer sentiment index for November, a key indicator of consumers’ willingness to continue spending, also weighed on bonds, traders said.

“The bulls in the marketplace are panic-stricken because of the price action,” said James Caron, fixed-income strategist at Merrill Lynch in Jersey City, N.J. “So if anything positive comes out [on the economy], everybody pulls their bid, ‘I’m out!,’ and boom, the market just goes slamming down.”

Bond markets closed early ahead of the holiday. Although Treasuries pulled off their lows, analysts said the market would remain vulnerable.

“The psychology in the market now is selling strength, so buyers are few and far between,” S&P; MMS’s Rupert said.

The bond market will be closed for Thanksgiving and will close early at 2 p.m. EST Friday.