U.S. Treasuries Drop by the Most in 3 Months

(Bloomberg) -- Treasuries slumped by the most in almost three months as stronger-than-forecast manufacturing numbers in China and the U.S. fueled investor confidence about the global economy and spurred stocks higher.

The benchmark 10-year yield climbed 10 basis points, the most since Jan. 4, ending the first day of the second quarter at 2.50 percent. The much-watched 3-month to 10-year yield curve steepened. While a softer U.S. retail sales number helped restrain yields early in the U.S. morning, the Institute for Supply Management’s factory gauge prompted a spike in rates, which then proceeded to grind higher through the U.S. afternoon. A strong manufacturing survey in China also helped buoy American equities and general risk appetite.

The market witnessed a “wide-spread risk-on and a deep sell-off in Treasury markets,” wrote strategists at NatWest Markets including John Briggs. “The strong reading on manufacturing momentum helped the market shrug off what was a fairly disappointing reading on U.S. February retail sales.”

The move marks the continuation of a rebound in Treasury yields from late last week. The 10-year yield has moved higher since sliding to a 15-month low of 2.34 percent in the wake of the Federal Reserve last month lowered expectations for policy tightening.

To contact the reporter on this story: Benjamin Purvis in New York at bpurvis@bloomberg.net

To contact the editors responsible for this story: Paul Dobson at pdobson2@bloomberg.net, Emily Barrett

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