US Treasury yields rose on Thursday with longer-dated yields reaching their highest in about 11 weeks, in step with their German counterparts before Friday's US jobs report that may seal expectations the Federal Reserve will raise rates next week. Shorter-dated Treasury yields climbed to their highest in more than 7-1/2 years on bets of a pending rate increase.
Decent payroll growth, together with a resumption of wage growth last month, will likely propel Fed officials to make good on what a number of them hinted last week on a rate hike at its upcoming two-day meeting, analysts said.
"They raised expectations so much for a rate hike. The only thing that will stop them will be an extremely weak jobs report and sharp downward revisions for January," said Karl Haeling, vice president at Landesbank Baden-Wurttemberg in New York.
Interest rates futures implied traders priced at a 91 percent probability that the US central bank will raise interest rates by a quarter point to 0.75-1.00 percent at its meeting that begins next Tuesday, according to CME Group's FedWatch program.
Analysts polled by Reuters forecast that US employers likely added 190,000 workers last month, fewer than January's 227,000 and average hourly earnings likely grew 0.3 percent following a 0.3 percent fall in January.
The benchmark 10-year Treasury yield was up 4 basis points at 2.594 percent after touching 2.607 percent which was the highest since December 16, according to Reuters data.
The two-year yield, which is most sensitive to traders' view on Fed policy, was up nearly 2 basis points at 1.371 percent after hitting 1.379 percent which was last seen in August 2009. In earlier trading, US and German yields rose after European Central President Mario Draghi acknowledged economic improvement in the euro zone, which may warrant less support down the road
"Draghi removed some of his earlier cautious language. On balance it seemed a little less dovish," said Mike Lorizio, senior fixed income trader at Manulife Asset Management in Boston. Draghi's comments and the ECB's mild upgrade on its growth and inflation outlook on the euro zone spurred selling in German Bunds, which spread to Treasuries. On the supply front, the Treasury Department sold $12 billion of 30-year bonds to average demand at a yield of 3.170 percent, the highest yield at a 30-year auction since September 2014. The 30-year bond sale was the last leg of this week's $56 billion supply of coupon-bearing US government debt.