US Treasuries rose as 10-year yields above 3 percent attracted demand amid an uneven economic recovery and bets the Federal Reserve will maintain its pledge to keep its interest-rate target at record lows.
Benchmark yields dropped from the highest level since July 2011, before reports this week forecast to show US service industries expanded, while employers added fewer jobs. Janet Yellen is poised for confirmation by the Senate Monday as head of the central bank, which begins reducing its bond-buying programme this month and will release minutes of its December policy-makers meeting on January 8. The US will sell $64 billion of Treasuries maturing in three, 10 and 30 years this week.
“The three-percent level in 10s is going to be a key level to breach in a down-trade,” said Ian Lyngen, a government-bond strategist at CRT Capital Group LLC in Stamford, Connecticut. “We haven’t sustainably been able to do that. The minutes may have a hawkish spin to them, keeping in mind the Fed decided to taper at this meeting. We might need a bit more of a setup to take down 10s and 30s at this level.”
The benchmark 10-year yield fell two basis points, or 0.02 percentage point, to 2.97 percent at 8:21am in New York, according to Bloomberg Bond Trader prices. The 2.75 percent note maturing in November 2023 rose 5/32, or $1.56 per $1,000 face amount, to 98 3/32. The yield climbed to 3.05 percent on January 2, the highest level since July 8, 2011.
US government securities returned 0.1 percent as of January 3, according to indexes compiled by Bank of America Merrill Lynch. They lost 3.4 percent in 2013, the first annual decline since 2009.
“In the last week of last year, Treasury yields were moving up rather rapidly,” said Philip Marey, a senior market economist at Rabobank Groep in Utrecht, the Netherlands. “We’ve taken a step back because a lot of the good news is already incorporated in market prices. There are still some weak spots despite the strong data that we’ve seen from the US.”