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The booming economy arrives in the bond market

Data: FactSet; Chart: Harry Stevens/Axios

The two-year Treasury yield is spiking to levels not seen since before 2008, and U.S. 10-year and 30-year Treasury yields are hitting levels not seen in more than five years, having climbed steadily since September.

Why it matters: The second-longest economic expansion in U.S. history (and longest job-market expansion) shows no signs of slowing, and that has investors driving up bond yields as the Fed continues its plan to gradually raise interest rates.

  • The policy-sensitive two-year Treasury note has steadily risen for the past few years, since the Fed laid out a path to finally "normalize" rates from virtually zero in 2008.

Driving the news: In remarks on Wednesday, Fed Chairman Jerome Powell said interest rates are nowhere near the neutral level that doesn't speed up or slow down economic growth. That comment was a departure from what analysts assumed when the Fed removed the word "accommodative" from its policy statement last week, so faster rate increases are expected.

  • In a separate speech this week, Powell said the Fed's projections of a continued strengthening economy is not "too good to be true."

What to watch: Friday's jobs report is key, especially if wage growth is stronger than economists are expecting (spurring inflation fears, which the Fed has said it's watching closely). Kathy Jones, a fixed income strategist at Charles Schwab, told Axios yields will push even higher, should the job report come in better than the expected 185,000 new jobs.

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