US Treasuries were under selling pressure on Thursday as the Federal Reserve chairman warned that interest rates would need to rise further for inflation to slow to its 2 percent target.
The yield on two-year government bonds, which is sensitive to changes in interest rate expectations, rose as much as 0.1 percentage point to 4.8%, its highest point since early March. It was later trading up 0.08 percentage points on the day.
The yield on the 10-year note rose 0.07 percentage points to 3.8 percent. Bond yields rise while bond prices fall.
The moves came after Fed Chairman Jay Powell signaled to the Senate Banking Committee that the central bank could choose two more quarter-point rate hikes by the end of the year.
Last week, the Fed held interest rates steady in a range of 5% to 5.25 percentage points, after 10 consecutive hikes in just 14 months.
U.S. Labor Department data on Thursday showed the number of new jobless claims last week was unchanged from the previous seven days, offering the central bank more leeway to raise interest rates.
The index, which measures the dollar against six other currencies, rose 0.4 percent, marking its strongest daily gain in nearly three weeks.
In stock markets, Wall Street’s tech-heavy Nasdaq Composite closed up 1 percent, rebounding from three straight days of losses. The benchmark S&P 500 rose 0.4 percent.
European shares traded lower after several central banks raised interest rates in the region more than investors expected.
The regional gauge Stoxx Europe 600 ended the day 0.5% lower, while France’s CAC 40 and London’s FTSE 100 were down 0.8%.
The moves came after the Bank of England raised its interest rate by an above-expected 0.5 percentage point to 5 percent, a day after official data showed UK inflation remained higher than forecast.
The Swiss National Bank raised its key interest rate by 0.25 percentage points to 1.75 percent and did not rule out further increases. Norway’s central bank raised its key interest rate from 3.25 percent to 3.75 percent and said it may raise it again in August.
“Today we’re seeing multiple central bank decisions that send the message that inflation remains a threat, and (they) continue to take that very seriously,” said Joel Kruger, market strategist at LMAX Group.
“The bottom line is that inflation needs to be managed even at the expense of growth, potentially, so we’re seeing less investor-friendly responses from central banks globally,” he added.
Elsewhere, Turkey’s central bank raised its benchmark one-week repo rate to 15 percent from 8.5 percent, in a sharp reversal from President Recep Tayyip Erdogan’s low interest rate policy. The smaller-than-expected rate hike pushed the pound to a new record low against the dollar, falling more than 5 percent to nearly 24.89.
Trading was muted in Asia as stock exchanges in China and Hong Kong were closed on Thursday and Friday for the Dragon Boat Festival.