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Treasury yields surged again on Thursday, lifting the benchmark 10-year to a 16-year high of almost 5%, after Federal Reserve Chair Jerome Powell said signs of above-trend growth or a too-strong labor market could warrant more monetary tightening.

Powell said the U.S. central bank is moving carefully on policy now after aggressive rate hikes since last year, to give time for tighter conditions to slow the economy and inflation.

“We have to use our eyes, and a little bit of risk management, and patience in slowing down the pace to make sure that we are seeing the full effects” of tighter policy, Powell said at the Economic Club of New York.

But he also said that more evidence of above-trend growth, or of a labor market no longer easing, could warrant further monetary policy tightening, a comment that spurred the benchmark 10-year Treasury to hit 4.9963% before easing slightly.

The Treasury market has been in a steep sell-off because of the U.S. economy’s strength despite the Fed raising interest rates to a range of 5.25%-5.5% in one of its most aggressive policy tightening cycles. Yields move inversely to price.

Fresh data this week has highlighted strong consumer demand and a tight labor market, with a Labor Department report on Thursday showing the number of Americans filing new claims for unemployment benefits fell to a nine-month low last week.

The unexpected decline in initial claims, in addition to this week’s news of solid September retail sales and factory production, suggest sustained economic momentum and helped push the 10-year Treasury yield up about 35 basis points this week.

“Without a doubt, the No. 1 driver in our eyes is the better-than-expected economic data continuing for longer and that’s lifted the back end of the Treasury yield curve,” said Roosevelt Bowman, senior investment strategist at Bernstein Private Wealth Management in New York.

The back end of the curve, or long-dated Treasuries, is more driven by longer-term growth and inflation expectations than just policy like the short end, he said.

“We’re of the view the tighter policy does work and that it slows economic growth,” Bowman said. “But it’s more of a late fourth-quarter, early first-quarter story than right now, given the current labor market data is still strong and initial claims in particular.”

The yield on the 10-year note was up 8.8 basis points at 4.990%, while the two-year yield, which reflects interest rates expectations, fell 4 basis points to 5.178% after earlier hitting a 17-year high of 5.2592%.

Shorter-dated rates, which are more sensitive to changes in central bank rate expectations, have risen less sharply than longer yields during the recent sell-off.

An increase in government deficit spending is also adding to upward pressure on Treasury yields, said David Petrosinelli, senior trader at InspereX in New York.

“At the end of the day the fiscal situation in the country is abysmal and there’s really no end in sight,” he said.

Futures traders have reduced the number of rate cuts they expect from the Fed next year from four to two, while projecting the Fed’s overnight rate to be above 5% through July 2024.

The probability of a December rate hike slid to about 31% after Powell spoke from 39% in the morning, according to CME Group’s FedWatch Tool.

The yield on the 30-year Treasury bond was up 10.8 basis points at 5.102%.

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