Treasuries dropped for the first time in four weeks on bets lawmakers will end the partial shutdown of the U.S. government in time to reach an accord on extending the federal debt limit, averting lasting damage to the economy.
Treasury yields rose to the highest in almost two years as the U.S. added more jobs than forecast for a third month, boosting bets the Federal Reserve will begin curbing the pace of its bond purchases as soon as September.
The worst first half for Treasuries in four years has wrung the unprecedented Federal Reserve stimulus out of bond prices as investors now look to low inflation and slow economic growth to contain yields.
The Treasury 10-year note yield fell to the lowest level this year as a government report showing the economy grew at a slower pace than forecast in the first three months boosted demand for the safest assets.
The Treasury’s $21 billion 10-year note auction attracted the least demand since August, the second consecutive sale of coupon debt this week to be hampered by concern the Federal Reserve will slow its asset purchases.
Borrowers are offering the biggest concessions since the start of the year to sell new corporate bonds in the U.S. as Europe’s sovereign-debt turmoil intensifies and signs emerge that America’s economy is weakening.