Treasury yields advanced in early trading on Friday after S&P Global reported the strongest expansion in the US services sector since December 2024, signaling resilient economic momentum despite ongoing manufacturing challenges.
The 2-year Treasury yield increased 3.8 basis points to 4.223%, while the 10-year yield climbed 2.6 basis points to 4.724%. The 30-year bond yield rose 3 basis points to 5.266%, though it remained below the multi-year highs reached earlier in the week. The move followed the release of S&P Global’s flash Purchasing Managers' Index (PMI) data for August, which showed the services PMI at 56.8, up from 54.6 in July, marking the highest reading since late 2024.
The composite output index also strengthened to 56.0 from 54.5, the highest level since April 2022. The data suggested US economic growth is on track to accelerate to roughly double the second quarter’s 1.5% annualized pace, with two-thirds of the third quarter already accounted for. The services sector’s expansion offset a slowdown in manufacturing, where supply disruptions tied to the US-Israeli conflict with Iran and reduced stock building weighed on activity.
Earlier in the week, Treasury Secretary Scott Bessent’s announcement of a potential bond buyback program had briefly weighed on yields, though the latest PMI figures reversed that trend. The services sector’s performance contrasted with ongoing challenges in manufacturing, where geopolitical tensions continued to disrupt supply chains.
In a separate release, S&P Global reported that the Eurozone’s manufacturing PMI rose to a 54-month high, while employment in the region’s manufacturing sector grew for the first time in three years, underscoring divergent trends between the US and European economies.
