Treasuries pared gains after a report showed the U.S. economy expanded at a faster-than-forecast 2 percent annual rate in the third quarter.
Ten-year yields dropped earlier from almost the highest in five weeks as Spanish unemployment exceeded 25 percent, boosting demand for the safest assets. Franklin Templeton Investments said it is buying Treasuries because of uncertainty surrounding the so-called fiscal cliff and the U.S. election.
“Risk assets got a bounce back and it’s causing a selloff of the day’s highs in Treasuries,” said Ira Jersey, an interest- rate strategist in New York at Credit Suisse Group AG, one of the 21 primary dealers that trade with the Federal Reserve. “It’s a little bit better than expectations. Consumption was weaker than thought. It’s a mixed bag altogether.
The benchmark 10-year yield dropped three basis points, or 0.03 percentage point, to 1.79 percent at 8:51 a.m. in New York after rising to 1.85 percent yesterday, the highest level since Sept. 17, according to Bloomberg Bond Trader prices. The 1.625 percent note due in August 2022 climbed 9/32, or $2.81 per $1,000 face amount, to 98 17/32.
Gross domestic product, the value of all goods and services produced in the U.S., rose at a 2 percent annual rate after climbing 1.3 percent in the prior quarter, Commerce Department figures showed today in Washington. The median forecast of 86 economists surveyed by Bloomberg called for a 1.8 percent gain.
Employment and growth are central themes in the campaigns of President Barack Obama and Republican challenger Mitt Romney before the Nov. 6 elections. Today’s report will be the last reading on the economy before the vote.
The Stoxx Europe 600 Index fell 0.6 percent and the MSCI Asia Pacific Index of shares dropped 1.1 percent.
Spanish unemployment climbed to a record in the third quarter as a deepening recession left one in four workers jobless, a government report showed today. Spain’s 10-year bond yields are set for the biggest weekly increase since August.
While Treasuries rose today, they are still heading for a second weekly decline. The 10-year yield has climbed one basis point since Oct. 19.