NEW YORK, Sept 30 (Reuters) - Investors sold off their Treasury holdings on Wednesday morning, driving yields up, after strong economic data and renewed hopes that a stimulus bill would be passed reduced demand for the safe-haven securities.
The Chicago Purchasing Managers Index showed that business conditions in the Chicago area, a hub for car and car parts manufacturing, improved far more than expected. The report, which was unexpectedly released more than an hour and a half early by MNI Indicators, showed the index jumped to 62.4 in September, the highest since December 2018, versus 52 forecast by participants in a Reuters poll.
“(The selloff) got going with the data at 8:00 am. The Chicago PMI data was released early and it was a blowout number - nearly 10 points above consensus,” Tom Simons, money market economist at Jefferies.
A separate report on Wednesday showed that U.S. private employers stepped up hiring in September.
Risk assets were also bolstered after Treasury Secretary Steven Mnuchin and U.S. House of Representative Speaker Nancy Pelosi both expressed hopes for a breakthrough on a coronavirus-related relief bill, as they prepared to resume stimulus talks.
“Headlines seem more positive than yesterday on a stimulus bill. And I think that people are thinking after the debate that (President Donald) Trump may be looking ... for something to take the attention away from the debate and turn the story into a more positive light towards him,” Simons said.
The Republican president and Democratic rival Joe Biden on Tuesday evening battled over Trump’s record on the coronavirus pandemic, healthcare and the economy in a chaotic and bad-tempered first debate marked by personal insults and Trump’s repeated interruptions.
The benchmark 10-year yield was last up 4.1 basis points to 0.686% its highest in a week. The long bond yield was up 5.9 basis points to 1.464%, its highest since Sept. 10. At the short end, the two-year yield remained anchored, last up 0.4 basis point to 0.129%.
With interest rates expected to be near zero for the next few years, the two-year yield has little chance to break out of the narrow range in which it has been trading since May at least. The yield curve, as measured by the spread between the two- and 10-year yields, was last steeper at 55.2 basis points. (Reporting by Kate Duguid; Editing by Will Dunham)
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