The three-year U.S. note yield was little changed at 0.67% today after climbing to 0.80% in June from May’s low of 0.29%. Treasuries were steady after the U.S. sold $32 billion of three-year notes at the highest yields since June 2011 amid speculation the Fed is preparing to reduce debt purchases.
The notes yielded 0.719%, compared with a forecast of 0.724% in a Bloomberg News survey of seven of the Fed’s 21 primary dealers. The bid-to-cover ratio, which gauges demand by comparing total bids with the amount of securities offered, was 3.35, versus 2.95 at the previous auction and the highest since May. Treasuries rose yesterday amid speculation the yield surge had been too rapid.
U.S. bond yields suggest investors anticipate the Fed will announce a reduction in asset purchases at its September policy meeting, according to JPMorgan Chase & Co.’s Heather Loomis.
Tapering “does appear to be baked in,” with as much as 80% of the market expecting it, Loomis, director of fixed income in San Francisco for JPMorgan Private Bank, said during a television interview with Sara Eisen and Erik Schatzker.
Greece’s 10-year yield increased six basis points to 10.99% and the rate on similar-maturity Portuguese debt fell 20 basis points to 6.73%. European governments said the nation would receive 2.5 billion euros this month and 500 million euros in October if it delivers on economic reforms and cuts to spending.
Spanish bonds fell, with the 10-year yield rising six basis points to 4.73%, as the government sells 15-year securities via banks.
The cost of insuring against losses on corporate bonds decreased, with the Markit iTraxx Europe Index of credit-default swaps on 125 investment-grade companies dropping 5 basis points to 106.5, the lowest in a month.
Gold futures pared gains after rising as much as 1.9% to $1,258.70 an ounce. Copper fell 1.2% in New York. West Texas Intermediate oil reached a 14-month high, gaining 0.4% to $103.53 a barrel.