New York: Treasuries fell last Thursday, with the difference in yields between 2- and 10-year notes widening to a record amount, as investors bet the recovery will fuel inflation and reduce demand at the government's debt auctions.
The 10-year note's yield climbed to the highest level in four months as reports showed increases in sales of existing homes and orders for durable goods. The US will sell a record-tying $118 billion (Dh433 billion) of 2-, 5- and 7-year notes this week.
"We are in a steepening trend," said John Spinello, chief technical strategist in New York at Jefferies Group Inc, one of the Federal Reserve's 18 primary dealers, which are required to bid at government debt auctions. "It was the recognition that the Treasury will be extending the debt as we know it and the economy is showing signs of recovery."
The benchmark 10-year note's yield rose 26 basis points last week, or 0.26 percentage point, to 3.80 per cent, according to BGCantor Market Data. That's the highest level since August 10. The 3.375 per cent security due in November 2019 fell 2 5/32 or $21.56 per $1,000 face amount to 96 16/32.
Two-year note yields rose 18 basis points on the week to 0.97, the highest level since October 30. The note to be sold today in a record-tying $44 billion offering traded at 1.02 per cent in pre-auction trading.
The debt drew a yield of 0.802 per cent, the lowest ever, at the last auction, a $44 billion offering on Nov-ember 23.
The difference, or spread, between 2- and 10-year note yields widened to 2.88 percentage points on December 22. The previous record of 2.81 percentage points was set on June 5, when Treasuries plunged after a government report showed the smallest decline in US payrolls in eight months. Ten-year note yields touched 4 per cent the following week, the highest level in 2009.
US Treasuries of all maturities have lost 3.3 per cent this year, according to Bank of America Merrill Lynch indexes.
