U.S. government securities maturing in 10 years or more have handed investors a 5.3 percent loss in the past three months, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies.
Existing home sales dropped 1.6 percent last month from August, according to the median forecast of 78 economists surveyed by Bloomberg News before the National Association of Realtors reports the figure at 10 a.m. in New York. They rose 7.8 percent in August. Housing starts climbed 15 percent in September from August to a four-year high, government data showed Oct. 17.
“The economic backdrop is still quite weak and we are yet to see a sustainable improvement in economic indicators,” said Brian Barry, a fixed-income analyst at Investec Plc in London. “It would be a surprise if Treasury yields keep rising as they have this week. You wouldn’t expect such a large increase in yields given the negatives on the horizon as Treasuries are still a safe-haven asset.”
The Fed will sell as much as $1.1 billion of Treasury Inflation Protected Securities today due from April 2014 to January 2016, according to the Fed Bank of New York’s website. The central bank is swapping short-term Treasuries in its holdings for longer-term securities to put downward pressure on borrowing costs, part of its efforts to spur the economy.
Bidders in a $7 billion sale of 30-year inflation-indexed securities yesterday accepted a record-low yield of 0.479 percent for securities that guard against the threat of rising consumer prices.
The difference between yields on 10-year notes and same- maturity Treasury Inflation Protected Securities, a gauge of trader expectations for consumer prices over the life of the debt, was little changed today at 2.52 percentage points. The average over the past decade is 2.17 percentage points.