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The decline in the price of US Treasury notes gathered steam on Wednesday morning, pushing yields higher as investors reacted to strong data on the manufacturing sector and jobs market.

The 10-year yield jumped almost 6 basis points to 2.513 per cent, which would be the highest level on a closing basis since December 27. The two-year yield roared higher by 5.2bps to 1.256 per cent.

The sell-off in US debt came after a report showed that the American factory sector expanded at the quickest rate in more than two years in January, with prices paid hitting its highest growth rate since 2011. At the same time, private-sector payrolls rose far more than analysts expected in January.

Both reports highlighted the rising inflationary pressures in the world’s biggest developed economy. Higher inflation is often negative for bond prices, since those assets provide fixed income streams. The strong data may also provide the Federal Reserve with additional evidence that supports a tightening in monetary policy, another bearish factor for bonds.

“We are seeing a further rise in bond yields in response to both the headline number and the prices paid component after seeing the strong [private sector jobs] report,” said Peter Boockvar, chief market analyst at The Lindsey Group.

Copyright The Financial Times Limited 2017. All rights reserved.

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