Treasuries fell, with 10-year yields rising from the lowest level in two months, before a government report that economists said will show factory orders rebounded in February.
Benchmark yields climbed after slipping below their 100-day moving average. The Federal Reserve’s gauge of inflation expectations dropped to the lowest level in a month before a government report this week that economists said will show the U.S. is adding jobs without driving wages higher. Fed Bank of Minneapolis President Narayana Kocherlakota will speak today on monetary policy.
“There has been a divide in the market between the recovery we see in the States versus global growth and European concerns, and that is keeping us near this level in yields,” said Sean Murphy, a trader at Societe Generale SA in New York, one of the 21 primary dealers that trade with the Fed. “Everyone is waiting for the payroll number to give us some direction. Until then we will continue to chop around in this range -- the range as I see it is 1.85 to 2.09.”
The 10-year yield rose three basis points, or 0.03 percentage point, to 1.86% at 9:31 a.m. New York time, according to Bloomberg Bond Trader prices. It earlier dropped to 1.82%, the lowest since Jan. 24, below the 100-day moving average at 1.83%. The 2% note due in February 2023 fell 7/32, or $2.19 per $1,000 face amount, to 101 9/32.
The 10-year yields will climb to 2.31% by year-end, according to a Bloomberg survey of economists.
Treasuries due in a decade or more have been trading at almost the cheapest level in 19 months relative to global peers with comparable maturities, according to Bank of America Merrill Lynch bond indexes. Yields on the Treasuries reached 57 basis points higher than those in an index of other sovereign debt on March 25, the most since August 2011, the data showed. The spread was 51 basis points yesterday.
Trading volume fell 31% yesterday to $165.3 billion, the lowest level since Dec. 31, according to ICAP Plc, the largest inter-dealer broker of U.S. government debt. It touched a 2013 high of $491 billion on Feb. 1. Average daily volume this year is $282.6 billion.
Factory orders rose 2.9% in February, after dropping 2% the previous month, according to a Bloomberg survey of economists before the Commerce Department data. A separate report today is forecast to show vehicles sales were little changed in March.