The decline pared a fifth weekly gain which had sent 10-year yields to the lowest since May 2013. U.S. government securities are headed for a weekly gain amid concern global growth is losing momentum, with a bigger drop in U.S. retail sales than economists estimated, stoking bets the Federal Reserve will delay an interest-rate increase.
“The pressure is likely to continue as long as economic data holds up,” said Aaron Kohli, an interest-rate strategist BNP Paribas SA in New York, one of 22 primary dealers that trade with the Fed. “The fear that was dominating the price action has abated.”
U.S. 10-year yields climbed three basis points, or 0.03 percentage point, to 2.19 percent at 8:36 a.m. New York time, according to Bloomberg Bond Trader prices. The 2.375 percent note due in August 2024 fell 1/4, or $2.50 per $1,000 face amount, to 101 21/32. The yield has declined nine basis points this week and dropped to 1.86 percent on Oct. 15, the lowest since May 2013.
“The flight to safety has somewhat abated,” said Thomas di Galoma, head of fixed income rates at ED&F Man Capital Markets in New York. “It’s a 2.10 percent to 2.30 percent market for the balance of the month. I don’t think 10-year notes get above 2.40 percent going into November, December.”
Treasury trading volume at ICAP Plc, the largest interdealer broker of U.S. government debt, was $679 billion yesterday. It more than doubled to a record $945.9 billion on Oct. 15, compared with an average of about $333 billion a day this year.
An average of bond yields on the Bank of America Merrill Lynch Global Broad Market Index was at 1.57 percent yesterday after dropping to 1.51 percent on Oct. 15, the lowest level in data starting in 1996.
“After wild, runaway sessions of lower yields and wider credit spreads, the latest data showed economic figures in the U.S. were not that bad,” said Luca Jellinek, head of European rates strategy at the investment bank unit of Credit Agricole SA in London. “That triggered a much-needed correction. Nonetheless, the market will remain worried about very low euro- zone inflation and growth.”
Treasuries declined as demand for haven assets eased after central bankers in the U.S. and Europe reassured the market that they will continue to keep liquidity ample -- a factor which some investors judged as positive for higher-yielding securities.
Italian and Spanish bonds rose for the first time in three days after European Central Bank Executive Board member Benoit Coeure said today officials will start the next phase of asset buying in coming days. Stocks rose, with the Stoxx Europe 600 Index surging 1.5 percent.
Boston Fed President Eric Rosengren said he still expects the Fed to raise interest rates in 2015 and it’s too soon to make a judgment on the recent market turbulence.
“We should” consider a fourth round of government bond purchases if the economy gets weaker, he said in an interview today on CNBC.
Futures show traders betting that the Fed will raise interest rates in December 2015. The central bank has held its short-term interest-rate target at zero to 0.25 percent since December 2008.
The Fed has expanded its balance sheet assets to $4.5 trillion from less than $1 trillion in 2008 in an effort to stimulate growth after the global financial crisis.
Fed Bank of St. Louis President James Bullard said yesterday the central bank should consider delaying ending bond purchases. In the U.K., Bank of England Chief Economist Andy Haldane said he is less likely to vote for a rate increase than three months ago because recent data have made him “gloomier.”
“Global central banks are reaching out to the market,” said Neil Jones, head of hedge fund sales at Mizuho Bank Ltd. in London. “That appears to improve risk sentiment. Under a revival of liquidity, the initial move is for higher stocks.”
Housing starts climbed 6.3 percent to a 1.02 million annualized rate in September from a 957,000 pace in August, the Commerce Department reported. The median estimate of economists surveyed by Bloomberg called for 1 million.
A report from the Labor Department yesterday showed first- time jobless claims dropped to 264,000 last week, the lowest since April 2000 and less than any projection in a Bloomberg News survey of economists. Industrial production rose 1 percent in September, beating all of the analysts’ predictions, Fed data showed.
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