Treasuries rose as the World Bank lowered its forecast for global growth amid concern central banks are considering pulling back on stimulus measures, fueling demand for the relative safety of government debt.
Ten-year note yields fell the most in a week after the World Bank yesterday pared its projections for economic expansion in 2013 to 2.2% from a January estimate of 2.4%. The Federal Reserve meets June 18-19, when it will discuss its bond-buying program. The U.S. will sell $13 billion of 30-year bonds today, after demand declined at three- and 10-year note auctions this week.
“The No. 1 thing that today’s market shows you is that Treasuries remain an international asset class,” said Ira Jersey, an interest-rate strategist at Credit Suisse Group AG in New York, one of 21 primary dealers that trade with the Fed. “When you have global angst in risky assets, even if the U.S. isn’t doing that badly, people still move to Treasuries to find a safe haven.”
U.S. 10-year yields fell three basis points, or 0.03 percentage point, to 2.20% at 10:53 a.m. New York time, according to Bloomberg Bond Trader data. They slid earlier as much as seven basis points, the most since June 6. The price of the 1.75% security due in May 2023 rose 9/32, or $2.81 per $1,000 face amount, to 96 1/32.
Thirty-year bond yields declined three basis points to 3.34%.
The MSCI Asia Pacific Index of stocks dropped 2.3%, while the Standard & Poor’s 500 Index rose 0.4% after falling 0.3%.
U.S. yields have climbed this month as investors weighed whether the economy is strengthening enough for Fed Chairman Ben S. Bernanke to consider reducing bond purchases that have been used to keep borrowing rates low. Bernanke told Congress on May 22 the central bank’s policy-setting board could start scaling back its bond purchases in its “next few meetings” if the U.S. employment outlook shows sustainable improvement
The Fed is buying $85 billion of U.S. government and mortgage-backed securities each month to put downward pressure on borrowing costs. It’s scheduled to purchase as much as $3.5 billion of Treasuries today due from August 2020 to May 2023.
Volatility in Treasuries as measured by the Bank of America Merrill Lynch MOVE Index was at 81.89 yesterday, after rising to 84.75 on June 6 and June 10, the highest level in almost a year. It has averaged 62.3 over the past 12 months.