U.S. government securities returned 1.1% in April as of yesterday, according to Bank of America Merrill Lynch indexes. The S&P 500 gained 1.7% including reinvested dividends, data compiled by Bloomberg show.
Fed purchases have held down both yields and volatility. Bank of America Merrill Lynch’s MOVE index measuring price swings was 49.65 basis points yesterday. It set a record low of 49.39 last week.
The Fed plans to purchase as much as $5.25 billion of securities maturing between April 2017 and December 2017 today, according to the New York Fed’s website. The central bank is buying $85 billion of Treasury and mortgage debt a month to support the economy by putting downward pressure on borrowing costs. It spent $2.3 trillion on Treasury and mortgage-related debt from 2008 to 2011 in the first two rounds of its policy known as quantitative easing.
Several Fed officials said the central bank should begin tapering its bond-buying program this year and stop it by year- end, minutes of their March 19-20 meeting showed.
U.S. employment and manufacturing expanded less in March than economists surveyed by Bloomberg News predicted, while retail sales and durable goods orders dropped. Gross domestic product expanded at a 2.5% annual rate in the first quarter, less than the 3% expansion forecast by economists in a Bloomberg survey.
Hiring increased while manufacturing growth slowed, reports this week will show, based on responses from economists. Data today will indicate consumer confidence rose, according to a surveys.
“For now, there’s a really good tone to the Treasury market,” said Sean Murphy, a trader at Societe Generale SA in New York, a primary dealer. “All the talk of the Fed tapering has been pushed back to early next year --or later rather than sooner.”