Treasury 10-year yields touched 2% for the first time since April after U.S. durable-goods orders climbed more than forecast. The Standard & Poor’s 500 Index retreated following an eight-day rally, its longest since 2004. The yen strengthened and the pound weakened.
Rates on 10-year notes were up two basis points at 1.97 percent at 4 p.m. in New York after climbing to as high as 2.004%. The Standard & Poor’s 500 Index fell from a five-year high, losing 0.2% to 1,500.21. The Shanghai Composite Index jumped to a seven-month high as Chinese industrial companies’ profits gained for a fourth month. Japan’s currency rose against 14 of its 16 major peers. The pound dropped to its lowest level against the euro since 2011.
U.S. durable goods orders increased 4.6% in December, surpassing the 2% median forecast in a Bloomberg survey. Policy in developed countries isn’t “maxed out” and central bankers can be flexible in meeting inflation goals, Mark Carney, who becomes Bank of England governor in July, said at the World Economic Forum over the weekend.
“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.”
Two-year notes also retreated, sending their yields up less than one basis point to 0.28%. Thirty-year rates increased one basis point to 3.14%.
The S&P 500 closed at the highest level since December 2007 last week. The index has rallied 5.3% this month, the best start to a year since 1987. Pension funds may need to sell stocks and buy fixed income to rebalance asset allocations, according to Societe Generale SA. U.S. pensions may pull $22 billion from equities, strategist Ramon Verastegui wrote in a note.
Caterpillar Inc., the biggest maker of construction and mining equipment, led gains in the Dow Jones Industrial Average after saying growth in its sales and profit in 2013 will come in the second half as the world economy improves.
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