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Portfolio > Economy & Markets

US 30-year bonds fall for third consecutive day

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(Bloomberg) — Treasury 30-year bonds fell for a third day as investors pared bets the Federal Reserve will push quickly to raise interest rates after comments yesterday by central-bank Chair Janet Yellen.

Prices on Treasuries declined as a gauge of U.S. manufacturing rose and data fueled speculation the euro region’s economic recovery is gathering pace, decreasing demand for the safest assets. A government report later this week will show the American economy added the most jobs this year, economists surveyed by Bloomberg forecast.

“People try to jump on a trend when it looks like it’s appearing,” said Michael Cloherty, head of U.S. interest-rate strategist at Royal Bank of Canada’s RBC Capital Markets unit in New York, one of 22 primary dealers that trade with the Fed. “It’s gone too far and will continue to steepen.”

The 30-year bond yield climbed four basis points, or 0.04 percentage point, to 3.60 percent at 10:04 a.m. in New York, according to Bloomberg Bond Trader data. The price of the 3.625 percent security maturing in February 2044 dropped 3/4, or $7.50 per $1,000 face amount, to 100 15/32. Five-year note yields rose two basis points to 1.74 percent.

The yield difference between five- and 30-year securities increased to 1.86 percentage points, steepening for a second day. It was 1.80 percentage points on March 28.

The benchmark 10-year note yield advanced four basis points to 2.75 percent.

U.S. manufacturing

The Institute for Supply Management’s index of U.S. manufacturing increased to 53.7 in March from 53.2 a month earlier, the Tempe, Arizona-based group reported today. Readings above 50 indicate growth. The median forecast in a Bloomberg survey of 81 economists was 54. Manufacturing accounts for about 12 percent of the economy.

The U.S. economy added 200,000 jobs in March, according to the median forecast of economists in a Bloomberg survey. The Labor Department will release the data on April 4. The average number of jobs added over the past six months is 180,000. Five-year notes rose yesterday after Yellen said “considerable slack” in labor markets showed that the world’s biggest economy will need the Fed’s support for “some time.”

Yellen said in March the central bank might start increasing the benchmark rate about six months after ending its bond purchase program. She didn’t mention a timetable yesterday.

Growth in euro-area manufacturing stayed close to the highest level in almost three years in March and German unemployment fell for a fourth month, reports showed today. China’s official purchasing managers’ index was at 50.3 in March, versus 50.2 in February and the 50.1 median estimate in a Bloomberg survey.

Yield bets

The 10-year Treasury yield will increase to 3.05 percent by June 30, based on a Bloomberg survey of financial companies with the most recent forecasts given the heaviest weightings.

“Yields will go up,” said Yoshiyuki Suzuki, head of fixed income in Tokyo at Fukoku Mutual Life Insurance Co., which has the equivalent of $59 billion in assets. “We will see better numbers” on the economy, he said.

Low inflation and demand for safety after Russia’s annexation of Crimea will keep 10-year yields in a range of 2.60 percent to 2.90 percent this month, said Hideaki Kuriki, a bond trader in Tokyo at Sumitomo Mitsui Trust Asset Management Co., which has the equivalent of $41 billion in assets.

The difference between yields on 10-year notes and similar-maturity Treasury Inflation Protected Securities, a gauge of expectations for consumer prices over the life of the debt, was 2.14 percentage points. The average over the past decade is 2.21 percentage points.


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