2-year Treasury yield ends at almost 5% after Fed's Williams answers question on possible rate hike

By Vivien Lou Chen

A selloff in U.S. government debt pushed the policy-sensitive 2-year rate to a five-month high on Thursday after a Federal Reserve official did not rule out the possibility of a rate hike.

What happened

The yield on the 2-year Treasury BX:TMUBMUSD02Y rose 5.8 basis points to 4.988%, from 4.930% on Wednesday. Thursday's level is the highest since Nov. 13, based on 3 p.m. Eastern time figures from Dow Jones Market Data. The yield on the 10-year Treasury BX:TMUBMUSD10Y jumped 6.2 basis points to 4.646%, from 4.584% on Wednesday.The yield on the 30-year Treasury BX:TMUBMUSD30Y rose 4.6 basis points to 4.745%, from 4.699% on Wednesday.

What drove markets

During an appearance on Thursday, New York Fed President John Williams responded to a question by failing to rule out the possibility that the central bank's next move might be to raise rates, though this was not his base case.

Traders keyed in on the part of Williams' comments in which he said that if the data signals a need for higher interest rates to achieve the Fed's goals, then policymakers would "obviously" want to do that.

See also: June Fed rate-hike risk looms as U.S. labor market stays strong

In data released on Thursday, weekly initial jobless-benefit claims were flat at 212,000 last week and showed no sign of rising layoffs. In addition, the Philadelphia Fed's gauge of regional business activity jumped to 15.5 in April, or the highest level in two years, from 3.2 in the prior month.

Separately, Treasury's $23 billion of 5-year TIPS came in strong, with above-average takes from direct and indirect bidders.

-Vivien Lou Chen

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04-18-24 1547ET

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