US yields rise in global sell-off

The US Treasuries market sagged on Wednesday with benchmark yields hitting their highest in six weeks amid a global bond sell-off, as the US Federal Reserve acknowledged a softening in economic growth but gave no fresh clues on when it may raise rates. Traders blamed the dumping of Treasuries, German Bunds and British Gilts on a combination of factors including less gloomy economic figures on Europe, a failed five-year German debt auction and hefty US bond supply this week.
"A lot of the action was driven by the sell-off in European bonds," said Kathy Jones, fixed-income strategist at Charles Schwab in New York. US yields had briefly retreated on data showing the US economy grew a paltry 0.2 percent in the first quarter, below an already subpar 1.0 percent increase forecast by economists.
The market sell-off quickly resumed as traders brushed off the disappointing report as the government cited winter weather and other factors for the poor growth. The Federal Open Market Committee noted the recent anemic activity due partly to the harsh winter, supporting the view it is in no rush to raise rates and stoking some Treasuries purchases in late trading. The yield on benchmark 10-year Treasuries notes was 2.037 percent, up 6.4 basis points from late on Tuesday. It touched its highest level in six weeks at 2.081 percent.
The 30-year bond yield rose 7.0 basis points at 2.740 percent after hitting a seven-week high at 2.792 percent. US yields broke above the top end of the trading range set after the March FOMC meeting when the group downgraded its economic outlook and view on the pace of future rate hikes. Interest rates futures implied traders expect the possible first meeting where the Fed might raise rates is December. Many analysts pegged September the as Fed's "lift-off."
Before the FOMC statement, the Treasury Department sold $29 billion in seven-year notes to solid demand, while its $15 billion two-year floating-rate note sale was tad softer than March. Earlier, a German five-year government debt sale "failed" as the total bids for the Bobl issue came in below the amount offered, as domestic inflation data suggested reduced risk of the euro zone slipping into deflation.