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US Bond Yields Surge as Stocks Hit Record Highs; 30-Yr Auction Sees Solid Demand

US Treasury bond yields rose to the highest levels since late July Thursday, helping trim the amount of global government debt trading with negative yields, as investors shifted cash into riskier markets amid renewed trade hopes and surprisingly resilient economic data.

Wall Street printed fresh record highs Thursday comments from senior officials in Beijing that suggest the US and China could roll back tariffs on billions worth of goods as part of the soon-to-be-agreed phase one trade pact between the world’s two biggest economies. The remarks followed a series of reports this week that suggest a December signing ceremony — possibly in London — will mark the first major step towards ending the 16-month trade dispute that has threatened to tip some of the world’s biggest economies closer to recession.

The comments also added an extra dimension to a string of surprisingly solid economic data releases over the past two weeks, including a much a stronger-than-expected October jobs report, a bounce in Eurozone business activity from six-year lows and improving industrial orders and exports from Germany, the biggest economy in Europe.

Benchmark 10-year U.S. Treasury bond yields were marked 4 basis points higher on the session at 1.97%, a level last seen in late July and a move that puts the difference between 2-year note yields at around 25 basis points, a three-and-a-half month high.

Part of this week’s move, as well as the two-month decline in bond prices that have added 50 basis points to Treasury yields, was also linked to a heavy slate of U.S. government bond sales, which totaled more than $84 billion this week as the Treasury continues to fund a near-record budget deficit, which grew 26% from last year to $984 billion.

That said, a $19 billion auction of 30-year bonds attracted more than double the amount on offer, Treasury data indicated Thursday, even as yields rose to 2.43%, where more than half of the banking system’s primary dealers placed their bids.

European bond yields were also on the rise, as well, with benchmark 10-year German bunds, a proxy for risk-free interest rates in the region, traded at -0.243 basis points, the highest since early July. In France, 10-year benchmark government bonds, which are known as OATs, traded in positive territory for the second consecutive session.

The moves helped trim the total of global fixed income securities trading with a negative yield to $12.5 billion, according to Bloomberg data, down from as high as $16 trillion earlier this year.

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