Treasury yields peak on US economic growth
Unemployment claims down as retail sales and housing look up
New York: Treasuries fell, with 10-year notes touching the highest yield since April, as the US sold $72 billion (Dh264.4 billion) of debt amid data showing the economy is gaining steam.
Yields on 30-year bonds were the highest in 10 months as the amount of bids at the February 10 bond sale was less than the average for the past 10 auctions and the February 8 note sale drew the lowest demand in the category of bidders that includes foreign central banks since May 2007. The Labour Department reported initial claims for unemployment insurance fell to the lowest since July 2008. Government reports next week are forecast to show January retail sales and housing starts grew.
"The market is looking away from Treasuries and focusing more on the growing recovery and looking where the money is going, and that is too risky assets," said Kevin Giddis, president of fixed-income capital markets at the brokerage firm Morgan Keegan in Memphis, Tennessee. "The market will look to economic reports for more confirmation of the recovery."
Ten-year note yields fell one basis point to 3.63 per cent in New York, according to BGCantor Market Data, compared with 3.64 per cent on February 4. The yield touched 3.77 per cent on February 9, the most since April 29.
Thirty-year bond yields were little changed at 4.69 per cent. They reached 4.79 per cent on February 9, the highest since April 7.
"The bias seems to be towards higher rates now with economic numbers generally coming in better than expected," said Larry Milstein, managing director in New York of government debt trading at R.W. Pressprich, a fixed-income broker and dealer for institutional investors.
Consumer sentiment up
Applications for jobless benefits decreased by 36,000, more than forecast, to 383,000 in the week ended February 4, Labour Department figures showed. Economists forecast claims would fall to 410,000, according to the median estimate in a Bloomberg News survey.
The University of Michigan consumer sentiment index rose to 75.1 this month from 74.2 in January, in line with a Bloomberg survey.
Retail sales may have increased 0.5 per cent in January, the seventh straight monthly gain, according to the median forecast of 62 economists surveyed by Bloomberg News. Housing starts in January rose 1.7 per cent after a decrease of 4.3 per cent in December, according to the average estimate of 59 economists in a separate survey.
Federal Reserve chairman Ben S. Bernanke told the House Budget Committee in Washington on February 9 that the unemployment rate is likely to remain high "for some time," indicating the central bank will maintain its policy of low interest rates and debt buying.
The Fed released an updated schedule for its $600 billion debt-buying plan, known as quantitative easing, to bolster the economy. The central bank said it plans to buy about $97 billion of Treasuries in 18 operations from February 11 through March 9.
"The Egyptian story is adding a bit to the market because there is still a lot of uncertainty about what the situation will look like going forward," said Christian Cooper, head of US dollar derivatives trading in New York at Jefferies & Co., one of the 20 primary dealers that trade with the Fed.
