Treasuries rose for a third day, the longest stretch this month, as investors sought haven on concern European Central Bank President Mario Draghi’s plan to buy government debt may fail to stop a euro-bloc breakup.
The yield on the 10-year note has declined 10 basis points this week after reaching a four-month high on Sept. 14, a day after the Federal Reserve announced new measures to stimulate the U.S. economy. New housing construction rose less than forecast last month, a Commerce Department report showed. The Fed will purchase up to $2 billion in longer-term securities today as part of a program to keep borrowing costs down.
“We had a pretty big liquidation last week, and now were are retracing that price action,” said Tom Tucci, managing director and head of Treasury trading in New York at Canadian Imperial Bank of Commerce’s CIBC World Markets unit. “The economy is still weak.”
The U.S. 10-year yield fell four basis points, or 0.04 percentage point, to 1.77 percent at 9:21 a.m. New York time, according to Bloomberg Bond Trader prices. The 1.625 percent note due in August 2022 gained 11/32, or $3.44 per $1,000 face amount, to 98 22/32. The euro dropped 0.2 percent to $1.3022.
Thirty-year yields decreased five basis points to 2.96 percent, extending this week’s decline to 13 basis points. They rose more than 40 basis points in the two weeks ended Sept. 14.
Treasuries slid for the past two weeks as the ECB announced on Sept. 6 a plan to purchase bonds of troubled euro members to help contain market turmoil in the 17-nation region and Fed Chairman Ben Bernanke said last week the central bank will keep adding stimulus to the U.S. economy.
“There’s a vacuum of information and a lack of transparency on the euro-region’s rescue efforts, and that supports Treasuries,” said Orlando Green, a fixed-income strategist at Credit Agricole Corporate & Investment Bank in London. “We think it is a temporary blip and that yields will continue to rise as more clarity comes.”
Ten-year yields will climb to 2 percent by year-end, according to Credit Agricole forecasts. The rate will probably end the year at 1.80 percent according to a Bloomberg survey of analysts’ estimates.
Thirty-year bonds led gains after Richmond Fed Bank President Jeffrey Lacker said late yesterday the shock from the credit crisis may hamper efforts to bring down U.S. unemployment.