Two percent is the talk of the bond market.
The last time Treasury 10-year notes saw that yield level it was in the rear-view mirror after a government report showed wage declines, sparking demand for a haven. The employment report issued this month washed away those declines, sparking speculation a strong economy will translate into higher yields.
While a 2 percent 10-year yield is well below the 3.3 percent average for the past decade, it remains higher than comparable yields for 18 developed nations.
“That 2 percent level is a key buying area,” said Thomas di Galoma, head of fixed-income rates and credit at ED&F Man Capital Markets in New York. “We’re still one of the best- yielding currencies in the entire world.”
The 10-year yield rose as high as 2.01 percent Tuesday in New York, according to Bloomberg Bond Trader data. It last exceeded 2 percent on Jan. 9.
The rally was driven by speculation global economic slowing may hinder U.S. growth and convince the Federal Reserve to take a slower path to raising policy interest rates. Post-election turmoil and debt negotiations with Greece also fueled refuge demand.
“Greece is a total wild card,” di Galoma said. “Most think you’ll get some resolution with Greece, but it could still easily drag out.”
Bond-market sentiment shifted after a Feb 6. Labor Department report showed above-forecast jobs growth. Investors sped up their expectations for the Fed to increase interest rates, pricing in a 59 percent probability by September from 45 percent the day before.
Di Galoma said he remains skeptical about a rate increase this year.
“The Fed is on hold the entire year because of the lack of inflation and their dual mandate,” he said.