Treasuries fell for the first time in three days on speculation a shutdown of the U.S. government may end soon enough for lawmakers to work on extending the debt limit, minimizing damage to the economy.
Benchmark 10-year yields rose from almost the lowest level in seven weeks as the government began its first partial shutdown in 17 years after Congress failed to break a partisan deadlock by a midnight deadline. An extended stoppage may prevent the release of jobs data on Oct. 4 that’s closely watched for clues to Federal Reserve policy. The central bank last month refrained from slowing the bond-purchase program it has used to help to keep borrowing costs from rising.
“It’s a wait-and-see attitude on the government shutdown,” said Larry Dyer, a U.S. interest-rate strategist at HSBC Holdings Plc in New York, one of 21 primary dealers that trade with the Fed. “The expectation is it will be short-lived, and therefore the ultimate impact would be modest.”
The U.S. 10-year yield climbed four basis points, or 0.04 percentage point, to 2.65% at 2:56 p.m. New York time, according to Bloomberg Bond Trader prices. The price of the 2.5% note due in August 2023 fell 9/32, or $2.81 per $1,000 face amount, to 98 3/4. The yield rose as high as 2.66%. It dropped yesterday to 2.59%, the lowest since Aug. 12.
Congressional leaders have scheduled no further negotiations on spending legislation, raising concern among some lawmakers that the shutdown may have an impact on the more consequential fight over how to raise the U.S. debt limit to avoid a first-ever default after Oct. 17.
Rates on Treasury bills that mature Oct. 24 increased to 0.07% today after touching negative 0.01 on Sept. 27. Two years ago, one-month bills climbed to a 29-month high of 0.18% as the Aug. 2, 2011, deadline set by Treasury to avoid a default approached.
Three-month Treasury bill rates rose to 0.0203%. They touched negative 0.0101% on Sept. 27, the lowest level this year. The 2013 average is 0.048%.
Investors in Treasuries were long over the past week, betting the prices of the securities will rise, according to a survey by JPMorgan Chase & Co.
The proportion of net longs fell to 6 percentage points in the week ended yesterday, according to JPMorgan, 2 percentage points lower than the week ended Sept. 23. Outright longs rose to 21%, from 19%, while outright shorts increased to 15%, from 11%. Investors reduced their neutral bets to 64%, from 70%.