Treasuries rose in the longest rally in more than a year as the European Central Bank was said to wait until a court ruling before unveiling full details of a bond-buying plan to help resolve the region’s debt crisis, renewing the refuge appeal of U.S. government debt.
The yield on the U.S. 10-year note fell for a sixth day in its longest decline since May 2011 as data showing that demand for U.S. capital goods fell the most in eight months bolstered speculation the Federal Reserve will add monetary stimulus. Treasuries headed for their first weekly gain in a month amid concern ECB President Mario Draghi may not announce a definitive purchase program at the bank’s September meeting.
“There’s a lot of uncertainty, and it could go very wrong,” David Ader, head of U.S. government-bond strategy at CRT Capital Group LLC in Stamford, Connecticut, said of the ECB speculation. “All of us were excited to think that on Sept. 6 we would get details of bond-buying plan. There’s a lot of room for disappointment.”
The benchmark 10-year yield dropped four basis points, or 0.04 percentage point, to 1.64 percent at 10:07 a.m. in New York, according to Bloomberg Bond Trader prices. It touched 1.63 percent, the lowest since Aug. 13. The yield slid 17 basis points this week, the most since the five days ended June 1.
Treasuries are the most expensive since Aug. 6, according to the term premium, a model created by economists at the Fed that includes expectations for interest rates, growth and inflation. The gauge was negative 0.87 percent today, after reaching negative 0.70 percent on Aug. 16, the least costly since May. A negative reading indicates investors are willing to accept yields below what’s considered fair value.