Treasuries rose for a fourth week, with 10-year yields dropping the most in three months, as investors awaited signals on the probable timing of Federal Reserve interest-rate increases in policy-maker speeches today.
Yields on two-year notes headed for the steepest weekly decline since 2010 as investors push back forecasts for higher interest rates after the Fed this week highlighted risks to the U.S. economy. Philadelphia Fed Bank President Charles Plosser was speaking in New York today, while his colleagues Esther George, Richard Fisher and Jeffrey Lacker are also scheduled to deliver public remarks.
“The Fed changed the goalpost again,” said Thomas Roth, senior Treasury trader in New York at Mitsubishi UFJ Securities USA Inc. “Most of the move this week was on Europe and the dollar and the Fed’s emphasis of it in the minutes. We’re now data dependent on Europe.”
The benchmark 10-year yield was little changed at 2.32 percent at 9:26 a.m. New York time, according to Bloomberg Bond Trader data. The 2.375 percent notes due in August 2024 traded at 100 1/2.
The yield has declined 12 basis points this week, the most since the week ended July 11. It touched 2.28 percent yesterday, the lowest in more than 15 months.
The U.S. two-year yield was little changed at 0.45 percent. The yield has declined as much as 13 basis points this week, the most since the period ended May 7, 2010.
A number of U.S. central bank officials said the nation’s expansion “might be slower than they expected if foreign economic growth came in weaker than anticipated,” according to minutes of the Sept. 16-17 Federal Open Market Committee meeting released on Oct. 8 in Washington.
Traders see about a 57 percent chance the Fed will raise its benchmark rate by its September 2015 meeting, fed funds futures data compiled by Bloomberg show. That compares with 78 percent odds seen on Sept. 30.
“Rate expectations have been pushed out,” said Nick Stamenkovic, a fixed-income strategist at broker RIA Capital Markets Ltd. in Edinburgh. “We’ve seen a very strong rally in Treasuries over the past weeks.”
Bank of America Merrill Lynch’s MOVE Index, which measures price swings in Treasuries based on options, rose to 66.47 basis points yesterday, the highest since Sept. 16. The amount of Treasuries traded through ICAP Plc, the largest inter-dealer broker of U.S. government debt, was $525 billion yesterday after climbing to $563 billion on Oct. 8, the most since May 2.
The extra yield benchmark U.S. notes offered over their Group of Seven peers shrank to 0.77 percentage point yesterday, the least since Sept. 3. The spread between yields on 10-year Treasuries and German bunds narrowed to 1.41 percentage points yesterday, the smallest difference since Aug. 19. The yield on German debt due in a decade fell to a record yesterday.
Pacific Investment Management Co.’s $202 billion Total Return Fund, which was managed by Bill Gross until his Sept. 26 departure, cut holdings of government debt last month.
Pimco’s Total Return Fund, the world’s largest bond mutual fund, reduced holdings of government-related debt to 38 percent in September from 41 percent the previous month, data posted on the company’s website showed. The category, which is the largest portion of the fund, includes holdings of U.S. Treasury notes, bonds, agency debt, interest-rate swaps and inflation-protected securities.
The fund has returned 4.14 percent this year, trailing 59 percent of its peers.
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