LONDON, Dec 15 (Reuters) - A selloff in U.S. Treasuries gathered pace on Thursday, with 10-year bond yields hitting their highest level since September 2014 as investors positioned for a faster pace of Federal Reserve rate hikes in 2017.
The yield on 10-year Treasuries soared 11 basis points (bps) to 2.64 percent and was on track for its biggest one-day rise since Nov. 9, the day after the U.S. presidential election.
That rise pushed the gap over benchmark 10-year German equivalents to its widest level since early 1989, according to Datastream.
The Fed’s decision on Wednesday to hike rates 25 basis points to 0.5-0.75 percent was well flagged but investors were taken by surprise when the “dot plots” of members’ projections showed a median of three hikes next year, up from two previously.
Short-dated U.S. Treasury yields also extended rises made following the Fed’s rate announcement.
Two-year Treasury yields rose to 1.30 percent in European trade on Thursday, their highest level since August 2009, pushing the gap over German peers to its widest since 2000 at 206 bps.
Five-year Treasury yields surged 11 bps to more than five-year highs at 2.12 percent, while 30-year yields were up 5 bps at 3.20 percent.
“The bond market’s reaction is based on what the dot plots show,” said Investec chief economic Philip Shaw. “But this has not been a good guide before, so we need to get some perspective.”
The rise in U.S. bond yields sent the dollar to 14-year highs against the euro, with the single currency falling as low as $1.0425. (Reporting by Dhara Ranasinghe; editing by John Stonestreet)