(Bloomberg) -- Treasuries extended losses after upbeat housing and durable goods data reinforced signs of resilience in the US economy, tempering expectations for more aggressive rate cuts this year.
Yields rose across all tenors, pushing the rate on benchmark 10-year bonds to 4.08% and putting them on course for their first two-day increase since the start of the month.
The move followed the release of a slew of data showing the economy is holding up: Industrial production posted its largest gain in nearly a year in January, while December business equipment orders topped forecasts and housing starts climbed to a five-month high.
"Rates reacted to the better-than-expected data on durable goods, housing and IP data by bear flattening," said Priya Misra, a portfolio manager at JPMorgan Investment Management. "But the move was muted since the Fed remains focused on the labor market and inflation."
Yields have ticked up since their sharp drop at the end of last week, when benign inflation data spurred bets on further Federal Reserve rate cuts this year. Traders are fully pricing two cuts this year, but have pared bets on a third this week.
Later Wednesday, investors will focus on the $16 billion auction of new 20-year notes and minutes of the FOMC's January monetary-policy meeting.
"The FOMC minutes of the January meeting could be more interesting since the Fed displayed a more hawkish tinge," said Padhraic Garvey, head of research for the Americas at ING Groep NV. "The minutes could reveal to what extent this was more aimed at stemming the dollar weakness at that point in time."
Investors are on the lookout for details that could point to a hawkish tilt from the Fed after it held interest rates steady in a 3.5% to 3.75% range as expected at its meeting last month.
In the press conference that followed, chair Jerome Powell talked up a "clear improvement" in the US outlook and said the job market shows signs of steadying.
His comments were backed up by last week's unexpectedly strong US employment report for January and further cemented by Tuesday's reading of private payrolls.
(Recasts with updated prices following release of data.)
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