Treasury matches longest skid since October

Treasury 10-year notes(CBOT:TYU14) declined for a fourth day, matching the longest skid since October, as investors judged as excessive a rally that last week took yields to the lowest in almost a year.

The benchmark note yields rose the most in more than six weeks yesterday as U.S. manufacturing expanded in May at the fastest pace this year. A report today is forecast to show U.S. factory orders grew for a third month in April, while nonfarm payrolls data on June 6 will show the economy added more than 200,000 jobs for a fourth month, according to a separate survey. Treasuries gained last week amid speculation the European Central Bank will cut interest rates at its June 5 meeting.

“There’s a little bit of a correction off the overbought levels we reached last week,” said Thomas Roth, senior Treasury trader in New York at Mitsubishi UFJ Securities USA Inc. “The market got ahead of itself and priced in a lot of good things from the ECB. We’re looking at what the ECB is going to do and what NFP is going to be.”

The Treasury 10-year yield increased four basis points, or 0.04 percentage point, to 2.57% at 10:07 a.m. in New York, according to Bloomberg Bond Trader data. The 2.5% note maturing in May 2024 fell 11/32, or $3.44 per $1,000 face amount, to 99 13/32.

The yield climbed five basis points yesterday, the biggest increase on a closing basis since April 17. It fell to 2.40% last week, the least since June 21.

Factories, Jobs

Investors in Treasuries increased bets the prices of securities would drop in value to the most since May 2006, according to a survey by JPMorgan Chase & Co.

The proportion of net shorts or bets the price of the securities will decrease, was 29 percentage points in the week ending yesterday, up from 18 percentage points the previous week, according to JPMorgan. Setting a short means borrowing and selling an asset in anticipation of making a profit by buying it back after its price has fallen.

The% of outright shorts, rose to 40%, from 35% the previous week. The percent of outright longs, or bets the securities will rise in value, dropped to 11% as of yesterday from 17%.

Investors raised neutral bets to 49%, up from 48% the previous week, the survey reported.

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