(Bloomberg) -- Treasuries slid as data that showed the US economy expanded at the fastest pace in two years dented expectations for interest-rate cuts in 2026.
Short-term yields rose the most, with the rate on two-year notes closing three basis points higher at 3.53% as traders priced in a less dovish monetary policy outlook.
Data released Tuesday showed inflation-adjusted gross domestic product increased at a 4.3% annualized pace in the third quarter. Economists had expected growth of 3.3%.
"The market is getting thrashed after the higher than expected GDP figure," said Tom di Galoma, managing director at Mischler Financial Group. "Flows remain light in cash but quite heavy in futures selling."
Later Tuesday, separate data showed US consumer confidence declined for a fifth consecutive month, reflecting ongoing concerns about inflation, tariffs and politics.
Still, investors trimmed bets on rate cuts next year, with only about a 16% chance of a reduction now seen for the Federal Reserve's meeting on January 28.
The moves in Treasuries held after a $70 billion sale of five-year notes, which drew 3.747%, nearly matching the yield just before the 1 p.m. bidding deadline in New York. Monday's auction of two-year notes also saw solid demand.
Ed Al-Hussainy, portfolio manager at Columbia Threadneedle Investment, said the five-year sale "looks good" with the auction "metrics on the screws."
(Updates prices.)
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