NEW YORK- Treasury yields rose on Tuesday after data on housing and new orders for US -manufactured capital goods came in stronger than expected, suggesting the Federal Reserve will hike rates at its next policy meeting to tap down on a resilient economy.
The yield on two-year Treasuries, which often reflect interest rate expectations, rose 9.3 basis points to 4.764 percent, while benchmark 10-year notes reversed a recent downward trend to rise 4.7 basis points to 3.766 percent.
New orders for key US -manufactured capital goods unexpectedly rose in May, but the prior month’s data was revised lower, indicating higher borrowing costs and an uncertain economic outlook curbed new capital investment by businesses.
Joe LaVorgna, chief US economist at SMBC Nikko Securities in New York, said the data solidified expectations that the Fed will hike rates again at its policy meeting on July 25-26.
“Any better-than-expected data just reinforces the notion the Fed is going to go, and then potentially keep rates higher longer,” he said. “The market believes that you don’t need to hike rates that much for the inevitable slowing that’s still to come.”
Shipments for non-defense capital goods excluding aircraft, a closely watched proxy for business spending plans, increased 0.7 percent last month, the Commerce Department said. But April data was revised lower to show so-called core capital goods rising 0.6 percent instead of 1.3 percent as previously reported. – Reuters
