US government bonds slide amid upbeat economic news

US government bond prices edged lower on Wednesday after a data stream suggested the economy remains on solid footing.

The yield on the 10-year US Treasury note stood at 2.145%, down from 2.134% on Tuesday. Yields rise as bond prices fall.

Bond yields extended their gains after data showed U.S. economic growth recovered faster than analysts had originally expected during the second quarter.

Gross domestic product – a large measure of goods and services produced in the United States – grew at a seasonally and inflation-adjusted rate of 3.0% over the prior year period, the pace fastest growing since the first quarter of 2015, according to the Commerce Department. said Wednesday.

Economists polled by the Wall Street Journal had expected an upward revision of 2.8%. Higher consumer spending and business investment helped support growth, even as state and local government spending declined, the Commerce Department said.

Hiring in the private sector is also improving. The U.S. private sector added 237,000 jobs in August, according to data from payroll processor Automatic Data Processing and forecasting firm Moody’s Analytics, beating the 185,000 jobs expected by economists polled by The Wall Street Journal.

Shoppers walk past food stalls inside DeKalb Market Hall at City Point in Brooklyn, NY


Mark Kauzlarich/Bloomberg News

Taken together, the data showed the U.S. economy was strong, weakening demand for bonds on Wednesday, which tend to do well in weaker growth environments. Investors will get another glimpse of the economic picture on Friday, when the Department of Labor releases its long-awaited jobs report.

However, even though several metrics of the economy have picked up, inflation has remained subdued, which analysts say may limit selling pressure on government bonds for the time being. Inflation tends to weaken demand for government debt as it erodes the purchasing power of their fixed returns.

“I guess most people don’t seem to be worried about a significant upside risk in inflation anymore,” said Chirag Mirani, head of US rates strategy at UBS.

Mirani noted that U.S. crude prices, which fell into bearish territory at the start of the summer, continued to decline in August, adding to his view that inflation should pose little threat to the market. Treasury for now. Crude for October delivery fell for a third straight session on Wednesday, taking its losses for the month to 8.4%.

Write to Akane Otani at [email protected]

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