Treasuries fell, pushing up yields the most in more than a month, before reports economists predict will show U.S. manufacturing and employment expanded.
U.S. government debt posted the biggest rally in seven months in August amid geopolitical tensions from Ukraine to the Middle East, and speculation that the European Central Bank will expand monetary stimulus to revive inflation. South Korea’s Government Employees Pension Service and Samsung Asset Management Co. both say they’re focusing their U.S. investing outside the Treasury market following the tumble in yields.
“You’re still looking at yield levels that are very aggressively low, with global growth still in question and the ECB likely to deliver more stimulus in the near-term,” said Adrian Miller, director of fixed-income strategies at GMP Securities LLC in New York.
The U.S. 10-year yield (CBOT:ZNU14) climbed six basis points, or 0.06 percentage point, to 2.40% at 9:17 a.m. in New York, according to Bloomberg Bond Trader data, the biggest gain since July 30. The 2.375% note due August 2024 fell 1/2, or $5 per $1,000 face amount, to 99 25/32.
The government securities returned 1.3% in August, the best performance since January, based on the Bloomberg U.S. Treasury Bond Index. The 10-year yield tumbled to 2.30% on Aug. 15, the lowest since June 2013.
Treasuries resumed trading after being closed worldwide yesterday in observance of the U.S. Labor Day holiday.
Bond yields across the euro area have tumbled, enhancing the appeal of payments available from Treasuries, since ECB President Mario Draghi said at the Federal Reserve Bank of Kansas City’s annual conference in Jackson Hole, Wyoming, on Aug. 22 that the central bank will use “all the available instruments needed to ensure price stability.” Officials are “ready to adjust our policy stance further,” he said.
“What has been happening outside the U.S. has been keeping yields at lower levels than you would expect,” said Philip Marey, a senior market economist at Rabobank Groep in Utrecht, the Netherlands.
German 10-year bund yields fell to a record 0.866% last week and France’s declined to 1.217%. The ECB next meets on Sept. 4. The German yield climbed five basis points today to 0.93% while that on the French debt increased six basis points to 1.32%.
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