Ten-year Treasury yield rises to 2% for first time since April

Payrolls Report

“The headline looks pretty strong,” Tom Porcelli, chief U.S. economist at primary dealer RBC Capital Markets LLC, said of the durable-goods report. “The biggest report is the payroll, and that’s where our attention will shift this week.”

Employers added 161,000 workers in January, after a 155,000 increase in December, a separate survey showed before the Feb. 1 report from the Labor Department. Other data this week may show manufacturing is stabilizing and consumer spending increased, based on responses from economists.

Treasuries pared losses as pending U.S. home sales declined in December for the first time since August, with the index falling 4.3% to 101.7 after a revised 1.6% increase the prior month, the National Association of Realtors reported today in Washington. The median forecast in a Bloomberg survey projected no change.

U.S government debt has handed investors a 0.9% loss in January, the worst monthly performance since March, according to Bank of America Merrill Lynch indexes. The MSCI All-Country World Index of shares gained 5.4% in January including reinvested dividends, according to data compiled by Bloomberg.

Central Banks

Yields climbed last week when the European Central Bank said lender will repay more of its loans than forecast, spurring optimism the worst of the region’s debt crisis is over.

The ECB said lenders will pay back 137.2 billion euros ($184.7 billion) of its three-year loans, so-called Longer-Term Refinancing Operations, this week. The figure compares with the median forecast of 84 billion euros in a Bloomberg survey of economists.

Fed policy makers said they may end their $85 billion monthly bond purchases sometime in 2013, with members divided between a mid- or end-of-year finish, according to the record of the Federal Open Market Committee’s Dec. 11-12 gathering.

Central banks in the U.S., the U.K. and Japan are all buying bonds to pump money into their economies as they try to spur growth. The ECB has indicated it is willing to do so.

“Bond yields depend on how long Fed stays low & when/if U.S. reaches 6.5% unemployment, 2.5% inflation,” Pacific Investment Management Co.’s Bill Gross, manager of the world’s biggest bond fund, wrote in a Twitter post. “My estimate: 2015.”

The difference between yields on U.S. 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 to 2.56 percentage points last week. The average over the past decade is 2.19 percentage points.

Bloomberg News

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