Treasury 10-year notes fell for the first time in three days as the Group of 20 nations debated ways to boost global growth, reducing demand for the safest securities.
Benchmark 10-year notes trimmed a weekly advance after a China’s State Information Center said Asia’s largest economy may rebound in the second and third quarters. Treasuries returned 0.7% this year through yesterday, according to Bank of America Merrill Lynch Index data, while the Standard & Poor’s 500 Index jumped 8.1%. Finance ministers and central bank chiefs from the G-20 are meeting in Washington.
“We are at expensive levels,” said Christopher Sullivan, who oversees $2.2 billion as chief investment officer at United Nations Federal Credit Union in New York. “Equities are up, suggesting there may be better sentiment on risk. That may present additional pressure for Treasuries.”
The U.S. 10-year yield climbed one basis point, or 0.01 percentage point, to 1.69% at 9:09 a.m. in New York, according to Bloomberg Bond Trader prices. The 2% note due in February 2023 fell 3/32, or 94 cents per $1,000 face value, to 102 3/4. The yield has fallen three basis points this week.
The Stoxx Europe 600 Index gained 0.4% and futures on the S&P 500 Index advanced 0.3%.
“Macro fundamentals still suggest that Treasury yields can be higher,” said Orlando Green, a rates strategist at Credit Agricole Corporate & Investment Bank in London. “The market will move to a more risk-on situation when it feels that negative shocks have diminished.”
The G-20 nations will affirm a commitment to avoid weakening their currencies to gain a trade advantage, according to a draft statement prepared for the two-day meeting and seen by a Bloomberg BNA reporter. Officials gathering in the U.S. capital will discuss the draft statement and changes may be made before its release.
China’s recovery is driven mainly by infrastructure spending and inventory adjustments by companies, Zhu Baoliang, head of the State Information Center’s economic forecast department, said at a forum in Beijing. The nation should stabilize money supply growth and loosen fiscal policy to boost economic growth, he said.
The Federal Reserve is today scheduled to buy up to $1.75 billion of Treasuries due from February 2036 to February 2043 as part of its plan to put downward pressure on borrowing costs through asset purchases, known as quantitative easing.
Minutes of the Fed’s March meeting released on April 10 showed several members of the Federal Open Market Committee “thought that if the outlook for labor market conditions improved as anticipated, it would probably be appropriate to slow purchases later in the year and to stop them by year-end.”
Purchases of existing U.S. homes rose to a 5 million annualized rate in March, the fastest since November 2009, according to the median estimate in a Bloomberg News survey before the National Association of Realtors releases the report on April 22. Commerce Department data the following day will show sales of new houses climbed last month to an annual pace of 419,000 from 411,000 in February, a separate survey showed.
The 10-year break-even rate, a measure of inflation expectations derived from the difference between yields on conventional Treasuries and index-linked securities, was at 2.31% after declining to 2.25% yesterday, the lowest level since Sept. 4.
Slowing inflation and a decline in commodity prices will benefit longer-maturity bonds, according to Barclays Plc.
“With long-term inflation expectations having fallen quite sharply, we believe the long end is again looking attractive,” Anshul Pradan, a debt strategist at Barclays in New York, wrote yesterday in a note to clients.
Barclays recommends investors bet 30-year Treasury yields will decline relative to seven-year ones, resulting in so-called flattening of the yield curve.
A yield curve is a graph charting the rates of bonds of a similar type with different maturities. It flattens when yields on longer-maturity bonds fall, those on shorter-dated debt rise, or when both occur at the same time.