Treasury yields touch one-week high as U.S. durable goods climb

Treasury 10-year yields touched the highest level in more than a week as orders for durable goods exceeded forecasts, bolstering bets the economy is strong enough for the Federal Reserve to start trimming bond purchases.

Government debt fell a third day before the U.S. is scheduled to sell $29 billion of seven-year notes after auctions of two- and five-year debt this week drew lower-than-average demand. New home sales climbed to a five-year high, the Commerce Department said yesterday. Thirty-year yields approached the highest level in almost two years.

“Durable goods data is showing some strength going into the third quarter,” said Thomas Roth, senior Treasury trader in New York at Mitsubishi UFJ Securities USA Inc. “We have more supply -- people are not willing to go too far out on the curve. That takes away some of the domestic demand. It’s going to be a bit more difficult auction today.”

The benchmark 10-year yield (CBOT:ZNU13) added three basis points, or 0.03 percentage point, to 2.62% at 9:48 a.m. in New York, according to Bloomberg Bond Trader prices. The yield touched 2.63%, the highest since July 15. The 1.75% note due May 2023 dropped 7/32, or $2.19 per $1,000 face amount, to 92 17/32.

The 30-year yield was at 3.67% after rising to 3.72% on July 8, the most since August 2011.

Investor Loss

Treasuries have slumped this year as signs the Fed will start tapering purchases undermined demand for the securities. Thirty-year bonds handed investors a loss of 11% in 2013 through yesterday, compared with a 5.7% decline for 10- year notes and a 3.8% loss for seven-year debt, Bank of America Merrill Lynch indexes show.

Bookings for goods meant to last at least three years increased 4.2% after a revised 5.2% gain in May that was bigger than initially reported, the Commerce Department said today in Washington. The median forecast of 79 economists surveyed by Bloomberg called for a 1.4% advance. Unfilled orders for big-ticket goods rose the most since December 2007.

“There’s been a signal that the global business cycle may have reached the bottom and the economy is recovering, albeit at different paces in the U.S. and Europe,” Annalisa Piazza, a fixed-income analyst at Newedge Group in London, said before the report. “The U.S. has led the others in terms of growth, and Treasury yields are likely to be on an upward path although we expect some volatility in coming months.”

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