(Bloomberg) — Treasury 10-year note yields touched a one-week low before the U.S. sells $48 billion in fixed- and floating-rate notes.
Bonds pared gains after sales of new U.S. homes unexpectedly climbed last month. Safety demand rose as Russia ordered military tests amid tensions in Ukraine. Treasuries were little changed in February, based on the Bloomberg U.S. Treasury Bond Index. The government will sell $13 billion of two-year floating-rate securities and $35 billion of five-year debt.
“The market stays range-bound,” said Justin Lederer, an interest-rate strategist at Cantor Fitzgerald LP in New York, one of 22 primary dealers that trade with the Federal Reserve. “People are still expecting a low rate environment going forward. There’s still a safe-haven bid given concerns in the world. I don’t think you’ll see rates ratchet higher.”
The benchmark 10-year note yield fell one basis point, or 0.01 percentage point, to 2.69 percent at 10:38 a.m. New York time, according to Bloomberg Bond Trader data. It touched 2.68 percent, the lowest level since Feb. 19. The yield increased earlier as much as two basis points to 2.72 percent. It rose five basis points this month.
The yield will be 3.37 percent by year-end, according to a Bloomberg survey of economists, with the most recent forecasts given the heaviest weightings. The move would hand a 2.8 percent loss to an investor who purchases today, data compiled by Bloomberg show.
Treasuries were supported today by fixed-income funds that manage portfolios against benchmark indexes and typically purchase longer-maturity Treasuries at month-end to align their holdings’ interest-rate sensitivity with the indexes. Barclays Plc said via e-mail yesterday its U.S. Aggregate Index will extend its duration, the measure of rate sensitivity, by 0.10 year on March 1, compared with 0.09 year on Feb. 1.
New-home sales increased 9.6 percent to a 468,000 annualized pace, exceeding the highest estimate of economists surveyed by Bloomberg and the most since July 2008, figures from the Commerce Department showed today in Washington.
The Standard & Poor’s 500 Index fell as much as 0.1 percent before reversing losses.
Treasuries were little changed this month after returning 1.8 percent in January, according to the Bloomberg U.S. Treasury index. Losses this month have stemmed in part from flows out of fixed-income and into equity funds.