Treasuries decline before U.S. sells $29 billion in seven-year notes

Durable Goods

Bookings for non-defense capital goods excluding aircraft, considered a proxy for future business spending, were little changed after rising 0.2 percent in August, less than previously estimated, a Commerce Department report showed today in Washington. Demand for all durable goods climbed 9.9 percent last month, exceeding the median forecast of economists surveyed by Bloomberg and reflecting a rebound in airplane orders.

“Those were a weak set of numbers,” Ader of CRT said. “It is contributing more to a depressed willingness to buy strength than a desire to sell weakness.”

Fewer Americans filed first-time applications for unemployment benefits last week as the seasonal volatility at the start of the quarter wound down.

Jobless claims decreased by 23,000 to 369,000 in the week ended Oct. 20 from a revised 392,000 the prior period, the Labor Department reported today in Washington. The median forecast of 48 economists surveyed by Bloomberg called for a drop in claims to 370,000.

GDP Report

U.S. gross domestic product rose at a 1.9 percent annual rate in the third quarter after expanding at a 1.3 percent pace the prior three months, the median economist estimate showed before data from the Commerce Department tomorrow. That would be the first back-to-back readings lower than 2 percent since the U.S. was emerging from the recession in 2009.

The Fed said the economy is still growing modestly and unemployment remains elevated as it maintained $40 billion in monthly purchases of mortgage-backed securities aimed at spurring the three-year expansion.

The central bank is swapping short-term Treasuries in its holdings for longer-term securities to cap yields as part of its efforts. The central bank plans to purchase as much as $5.5 billion of notes due from November 2020 to August 2022 today, according to the Fed Bank of New York’s website.

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, widened one basis point to 2.49 percentage points. The average during the past decade is 2.17 percentage points.

Ten-year yields will climb to 2.06 percent by June 30, according to a Bloomberg survey.

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