October 4, 2018 / 1:52 PM / 8 months ago

UPDATE 1-U.S. Treasuries sector posts worst loss since early 2017

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NEW YORK, Oct 4 (Reuters) - The U.S. Treasuries market on Wednesday suffered its biggest single-day loss since March 2017 as traders dumped government debt on stunningly strong economic data and perceived hawkish comments from Federal Reserve officials, private data showed.

The $15.3 trillion sector registered a 0.58 percent total loss, marking the steepest one-day decline since a 0.64 percent fall on March 1, 2017, according to an index compiled by Bank of America Merrill Lynch.

On Wednesday, Treasury yields hit multiyear peaks following data that showed services industries posted their strongest growth in 21 years in September and companies added the most workers last month since February.

Some Fed policymakers at the same time hinted the central bank is open to increasing key overnight borrowing costs in December, which would mark its fourth rate hike in 2018.

They based this view on expectations on solid economic growth in 2019 stemming from the tax overhaul enacted last December.

“If we see things getting stronger and stronger with inflation moving up, then we might move a little quicker. If we see the economy weakening or inflation moving down, we might move a little more slowly,” Fed Chairman Jerome Powell said at the Atlantic Festival on Wednesday.

Benchmark 10-year yield jumped over 10 basis points to its highest level in over seven years. On Thursday, it increased further, touching 3.232 percent.

On March 1, 2017, bond yields surged less than 24 hours after U.S. President Donald Trump’s first address before Congress where he spoke about $1 trillion in fiscal stimulus, tax cuts and looser regulations.

Moreover, William Dudley, who was the head of the New York Federal Reserve at the time, suggested the Fed may hike rates later that month.

On that day, the 10-year yield climbed a tad more than 10 basis points to 2.462 percent, while two-year yield rose 7 basis points 1.288 percent, which was the highest level since August 2009. (Reporting by Richard Leong and Jonathan Spicer; editing by Jonathan Oatis)

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