Fed Chairman Ben S. Bernanke this week defended the central bank’s bond-buying program, saying officials will sustain record stimulus even after the domestic expansion gains strength. The Fed said on Sept. 13 it will keep the main interest rate near zero until at least mid-2015 and buy $40 billion of mortgage debt every month in a third round of so-called quantitative easing.
The central bank bought $2.3 trillion of Treasury and mortgage-related debt from 2008 to 2011 in two rounds of purchases, known as quantitative easing. It also began its Operation Twist program to replace shorter-term debt in its portfolio with longer-term securities and put downward pressure on long-term borrowing costs.
A private report Oct. 3 showed companies added more jobs than forecast. Employers added 162,000 jobs last month, ADP Employer Services data showed, compared with a forecast of 140,000 jobs in a Bloomberg News survey of economists.
Applications for jobless benefits increased 4,000 to 367,000 in the week ended Sept. 29, Labor Department figures showed yesterday. The median forecast of 51 economists in a Bloomberg News survey was for a rise in initial jobless claims to 370,000.
Treasuries have gained 2.1 percent this year, according to Merrill Lynch indexes. Bonds returned 9.8 percent last year after gaining 5.9 percent in 2010, according to the index.
Ten-year yields will rise to 1.75 percent by December, according to the median forecast in Bloomberg surveys of banks and securities firms.
The U.S. will sell $66 billion in notes and bonds next week on three consecutive days beginning Oct. 9. It will auction $32 billion in three-year debt, $21 billion in 10-year securities and $13 billion in 30-year bonds, the Treasury announced yesterday.
“The market will turn its attention to next week’s supply,” said Ray Remy, head of fixed income in New York at the primary dealer Daiwa Capital Markets America Inc. “At these levels, the market has to go to higher yields.”