Treasurys

While the selloff abated on Wednesday, traders are on high alert for a resurgence in volatility — especially if U.S. non-farm payrolls data on Friday come in stronger than expected.

U.S. stocks ended the day higher and Treasury yields fell Thursday. Federal Reserve Chair Jerome Powell sidestepped investor concerns over the outlook for rates at an event.

The Federal Reserve Bank of New York's gauge of the 10-year term premium became positive on Monday, after having been negative for most of the past seven years, reflecting steep increases in longer-maturity Treasury yields.

Bond traders are bracing for Treasury yields to keep pushing higher after the Fed signaled it's likely to hold interest rates at lofty levels well into next year.

Treasuries are also likely to be supported as inflation can keep slowing even if growth does remain relatively healthy. The investment bank is advising its clients buy Treasury five-year notes and 30-year inflation-linked debt.

The surprisingly resilient US economy, ballooning debt and deficits, and escalating concerns that the Federal Reserve will hold interest rates high are driving yields on the longest-dated Treasuries back to the highest levels in over a decade.

The negative return, though not the first this year, signifies that the interest income the assets throw off is more than offset by the price declines associated with rising yields.

The latest offering will get Citadel Securities closer to its long-held ambition to become a primary dealer — a designation the Federal Reserve typically bestows only to firms active across all types of Treasury securities.

The yield on 30-year securities has climbed almost 25 basis points over the past three sessions, returning it to levels last seen in mid-November when inflation was still above 7%, more than double the current rate.

Wednesday's announcement will likely also see debt managers hoist regular auction sizes for securities across the yield curve — with potential exceptions or smaller bumps for notes less in demand.