Yields approach 3-month low

Treasuries rose, with 10-year yields approaching a three-month low, before a government report that economists predict will show U.S. job openings dropped in March.

U.S. government securities advanced after Federal Reserve Chair Janet Yellen said in testimony to lawmakers this week the U.S. economy still needs support from the central bank. Thirty- year bonds led gains today after declining yesterday when the government auctioned $16 billion of the securities. Economists predict data next week will show retail sales slowed in April.

“The U.S. data is not uniformly strong and the focus has shifted to the fact that despite the recovery, there is no sign of inflationary pressure,” said Salman Ahmed, a global strategist at Lombard Odier Asset Management in London. “Treasuries are supported as people buy into the idea that interest rates are not going to rise anytime soon. But over the next few months, data should show us whether Yellen’s dovish comments are misplaced.”

The benchmark 10-year yield fell two basis points, or 0.02 percentage point, to 2.60 percent at 8:22 a.m. in New York, according to Bloomberg Bond Trader prices. The 2.5 percent note due in May 2024 rose 6/32, or $1.88 per $1,000 face amount, to 99 5/32. The yield fell to 2.57 percent on May 5, the lowest since Feb. 3.

The number of positions waiting to be filled dropped to 4.13 million in March from 4.17 million the previous month, according the median forecast of economists surveyed by Bloomberg News before today’s Labor Department report.

 

Strong Dose

Yellen said in testimony to lawmakers this week the world’s biggest economy still requires a strong dose of stimulus five years after the recession ended because unemployment and inflation are short of the Fed’s goals.

Policy makers are unwinding the bond-buying program they have used to support the economy. They have kept their target for overnight lending between banks in a range of zero to 0.25 percent since December 2008.

Retail-sales growth cooled to 0.4 percent in April from a revised 1.2 percent the previous month, according to a separate Bloomberg survey.

Short-dated notes outperformed this week. Treasuries maturing in one-to-five years returned 0.1 percent this week through yesterday, based on Bloomberg World Bond Indexes. Securities due in 10 years and longer dropped 0.8 percent, the indexes show.

Bidding at a $16 billion auction of 30-year bonds yesterday was the weakest since August 2011, with investors submitting orders for 2.09 times the amount of debt offered. That’s down from 2.52 times at the previous sale on April 10. Demand also declined at a $24 billion sale of 10-year notes May 7 after increasing at a $29 billion three-year auction on May 6.

“The 30-year auction was fairly sloppy,” said Su-Lin Ong, the head of Australian economic and fixed-income strategy at Royal Bank of Canada in Sydney. “When we’ve pushed down the yield levels this low, it’s probably not that surprising.”

The 30-year yield fell three basis points to 3.42 percent after dropping to 3.35 percent on May 5, the lowest level since June 19.

 

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