Treasury 10-year-note yields traded at almost the lowest this year as U.S. personal spending slowed last month, signaling reduced economic growth and underpinning demand for the securities.
The benchmark 10-year Treasuries were little changed as a report showed household purchases rose 0.2% in March, compared with a 0.7% increase the previous month. The yield dropped on April 26, by the most in two weeks, as a report showed the U.S. economy expanded less than economists predicted. The Federal Open Market Committee will release a statement after a two-day meeting in Washington ending May 1. Treasury announced it will pay down the federal debt this quarter for the first time since 2007.
“The slow-growth theme is well entrenched in the psyche of investors,” said Adrian Miller, director of fixed-income strategies at GMP Securities LLC in New York. “By extension, it means the Fed will remain fully engaged past the third quarter and yields will stay low. The market is waiting to see what will come from the Fed’s statement on Wednesday.”
The benchmark 10-year notes yield was little changed at 1.67% at 3:31 p.m. New York time, according to Bloomberg Bond Trader prices. The yield fell to as low as 1.64% on April 23, the least since Dec. 12. The 2% note due February 2023 traded at 103.
The yield on the 30-year bond rose one basis point to 2.87%.
The Treasury projected it will pay down debt this quarter as tax receipts exceed forecasts and spending diminishes. The pay-down in net marketable debt was estimated at $35 billion in the April-June period, compared with a projection three months ago for net borrowing of $103 billion, the department said in a statement today in Washington.
“Our projections remain that coupon auction sizes should be unchanged,” said Shyam Rajan, an interest-rate strategist at Bank of America Merrill Lynch in New York, one of the 21 primary dealers obligated to bid at U.S. government debt auctions.
Treasury officials projected net borrowing of $223 billion in the quarter starting July 1. The estimates set the stage for the department’s quarterly refunding announcement on May 1. Congress has suspended the nation’s $16.4 trillion debt limit through May 18. Lawmakers will be debating proposals to raise the ceiling in the coming months to ward off the possibility of a U.S. default.
Treasury will announce the size of three securities sales on May 1. Bond dealers including Bank of America Corp., Morgan Stanley, Jefferies LLC, and HSBC Holdings Plc forecast that the Treasury will maintain the size of its offerings in May at $32 billion for three-year notes, $24 billion for 10-year debt and $16 billion for 30-year bonds.