NEW YORK (CNNMoney.com) -- The 10-year Treasury note yield rose to 4% Monday for the first time in 18 months, as reports continued to point to a strengthening economic rebound and traders braced for a major auction of Treasury bonds.
What prices are doing: The benchmark 10-year note fell 5/32 to 97, and its yield surged to 4%, an important psychological level, for the first time since October 2008, the height of the financial crisis. Bond prices and yields move in opposite directions.
The 30-year bond fell 29/32 to 96-6/32, and its yield rose to 4.85% from 4.80% Friday.
The 2-year note edged down 2/32 to 99-7/32 and yielded 1.19%. The 5-year note fell 25/32 to 98-9/32 and yielded 2.74%.
Prices ended lower Friday, a holiday-shortened trading day, after the March jobs report showed the biggest increase in jobs in three years. The Labor Department said the economy gained 162,000 jobs during the month.
What's moving the market: Bond investors continued to react to the March jobs report, as well as a report on pending home sales that pointed to a stronger housing market.
The Institute of Supply Management's non-manufacturing index also contributed to the rise in yields. It climbed to 55.4 in March from 53 the previous month -- any reading over 50 signals expansion.
Yields rose as the Treasury gears up to auction $82 billion in debt this week. The sales will be closely watched after the last round of auctions worth $118 billion was met with lackluster demand.
Investors met the first of the auctions with strong demand. They bid $27.5 billion on $8 billion of reopened 10-year Treasury inflation-protected securities.
The Treasury will offer $40 billion in 4-year notes Tuesday, $21 billion in reopened 10-year notes Wednesday and $13 billion in existing 30-year bonds Thursday.
What analysts are saying: "A fairly positive employment report and upcoming supply have Treasurys back on their heels right now," said David Coard, head of fixed-income sales and trading at the Williams Capital Group.
He said the market's reaction to the jobs report suggests that investors think the economy is becoming self-sustaining and that the Federal Reserve might have to tighten monetary policy sooner rather than later.
The Federal Reserve's Board of Governors is meeting Monday to discuss the discount rate, which it raised a quarter of a percentage point to 0.75% in February.
With the 10-year yield crossing the 4% level, Coard said investors could remain optimistic about the strength of the economic recovery and continue to sell Treasurys. But he said some may perceive Treasurys to be more attractive and use the high yield as an entry point into the market.
"I'm in the camp of those who feel that it remains to be seen whether the economic growth we've seen in recent quarters is sustainable," Coard said. "With the fiscal stimulus winding down, we're entering a phase where the training wheels are coming off the economy. The question is will it topple or remain upright."
|Overnight Avg Rate||Latest||Change||Last Week|
|30 yr fixed||3.85%||4.04%|
|15 yr fixed||3.02%||3.15%|
|30 yr refi||3.93%||4.15%|
|15 yr refi||3.06%||3.26%|
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