TREASURIES-10-year yields hit highest since April on inflation fears

By Karen Brettell

NEW YORK, Jan 8 (Reuters) - Treasury yields jumped on Wednesday and benchmark 10-year yields were the highest since April on concerns about a renewed uptick in inflation if the incoming Donald Trump administration enacts new tariffs.

Under Trump, both growth and inflation are expected to rise, but there are considerable uncertainties over what policies exactly will be implemented by the new government and what economic impact they will have.

A CNN report that Trump is considering declaring a national economic emergency to provide legal justification for a series of universal tariffs on allies and adversaries added to concerns about inflation on Wednesday.

“With the new administration coming in, there is some potential fear of that typical Q1 upturn in inflation,” said Michael Lorizio, head of U.S. rates trading at Manulife Investment Management.

Heightened uncertainty is also making investors wary of buying longer-dated debt, said Lorizio.

“When the range of potential outcomes widens in the U.S. economy that’s when duration really suffers and you begin to see some apprehension in terms of buying interest further out the curve.”

Interest rate-sensitive two-year note yields US2YT=RR were last down 1 basis point on the day at 4.285%.

Benchmark 10-year yields US10YT=RR rose 3.1 basis points to 4.716% and peaked at 4.73%, the highest since April 25.

The yield curve between two-year and 10-year notes US2US10=TWEB steepened three basis points to 42.9 basis points, the steepest since May 2022.

Thirty-year Treasury yields US30YT=RR rose 4.5 basis points to 4.9574% and reached 4.968%, the highest since Nov. 2023.

Data on Wednesday showed that the number of Americans filing new applications for unemployment benefits unexpectedly fell last week.

The ADP National Employment Report showed that employers added 122,000 jobs last month.

The U.S. government’s jobs report on Friday is expected to show that employers added 160,000 jobs in December. USNFAR=ECI

The Treasury Department is due to sell $22 billion in 30-year bonds on Wednesday, the final sale of $119 billion in coupon-bearing debt issuance this week.

The U.S. government saw average interest for a $39 billion auction of 10-year notes on Tuesday and soft demand for a $58 billion sale of three-year notes on Monday.

(Reporting By Karen Brettell
Editing by Tomasz Janowski)

((karen.brettell@thomsonreuters.com;))