Treasury 30-year yields rise from almost 4-week low before sale

Yields on Treasury 30-year bonds rose from almost a four-week low, before the U.S. auctions $16 billion of the securities amid speculation the Federal Reserve’s efforts to stimulate the economy may lead to inflation.

The long bonds rose earlier for a second day as President Barack Obama’s re-election fueled bets the Fed will keep buying bonds and as the approach of the so-called fiscal cliff of U.S. spending cuts and tax increases spurred demand for safety. Yields fell yesterday the most in five months.

“Treasuries had a big run yesterday,” said David Coard, head of fixed-income trading in New York at Williams Capital Group, a brokerage for institutional investors. “The longer end is weaker, but we do have 30-year bonds to sell.”

The 30-year bond yield increased one basis point, or 0.01 percentage point, to 2.84 percent at 9:23 a.m. in New York, according to Bloomberg Bond Trader prices. It fell earlier to 2.81 percent after reaching 2.80 percent yesterday, the lowest level since Oct. 12. Ten-year notes yielded 1.68 percent.

The bonds scheduled for sale today yielded 2.855 percent in pre-auction trading, down from 2.904 percent at last month’s sale. That compares with a record-low auction yield of 2.58 percent on July 12.

U.S. government securities traded at the most expensive levels in more than three weeks. The 10-year term premium, a model created by economists at the Federal Reserve that includes expectations for interest rates, growth and inflation, was negative 0.89 percent, the most costly since Oct. 15. A negative reading indicates investors are willing to accept yields below what’s considered fair value. The average this year is negative 0.76 percent.

Jobless Claims

Fewer Americans than forecast filed claims for unemployment insurance last week as the effects of Hurricane Sandy started to show up. Applications for jobless benefits fell by 8,000 to 355,000 in the week ended Nov. 3, the Labor Department said today in Washington. A Bloomberg News survey had forecast claims for jobless benefits increased by 2,000 to 365,000 last week.

“Jobless claims are likely to be distorted by the hurricane impact, so people are likely to dismiss any unexpected drop there,” said Ian Lyngen, a government-bond strategist at CRT Capital Group LLC in Stamford, Connecticut, before the report.

Bloomberg News

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