Treasury 10-year note yields touched 2% for the first time since April as orders for durable goods in the U.S. rose more than forecast, another signal the U.S. economic recovery may be strengthening.
The benchmark yield rose even as Fitch Ratings said the temporary suspension of the U.S. debt limit removes the near-term risk to the nation’s AAA credit rating. Federal Reserve officials start a two-day meeting tomorrow as investors speculate when policy makers will begin to slow stimulus. The U.S. will sell $35 billion in two-year securities today, the first of three note auctions totaling $99 billion this week.
“The economy is probably getting on better footing,” said Scott Sherman, an interest-rate strategist in New York at Credit Suisse Group AG, one of 21 primary dealers that trade directly with the central bank. “People down the road will start speculating when the Fed is going to unwind.”
Benchmark 10-year note yield rose four basis points, or 0.04 percentage point, to 1.98% as of 11:11 a.m. New York time, according to Bloomberg Bond Trader data, after rising as high as 2%, the highest since April 25. The price of the 1.625% security due in November 2022 fell 9/32, or $2.81 per $1,000 face value, to 96 26/32. The yield is still less than the average over the past decade of 3.64%.
“The Treasury market is trading like a beach ball -- you just can’t hold rates down, they keep jumping back up,” said William O’Donnell, head U.S. government-bond strategist in Stamford, Connecticut, at Royal Bank of Scotland’s RBS Securities unit, a primary dealer. “There is a lot of resistance lining up about 2%, at 2.09/10 area. A lot of bearish channels and trend lines come in there -- that’s why we’ve been sporting this 1.7 to 2.1 range.”
Resistance is an area on a price graph where analysts anticipate sell orders to be clustered.
RBS forecasts the 10-year yield to decline to 1.90% by end of 2013. The yield will rise to 2.25% at year-end, according to the weighted average forecast of 76 economists in a Bloomberg survey,
Orders for durable goods in the U.S. rose 4.6% in December after a 0.7% gain the prior month, a Commerce Department report showed in Washington. The median forecast of 76 economists surveyed by Bloomberg called for a 2% gain in overall orders.
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