Treasuries fell, with 10-year note yields rising for the first time in seven days, after a gauge of manufacturing was stronger than forecast and as a Federal Reserve official said the drop in oil prices will boost the economy.
The benchmark yields increased from an almost a six-week low after the Institute for Supply Management’s factory index was little changed at 58.7 last month, the second-strongest level since April 2011 and compared with the median forecast in a Bloomberg News survey of 58. Fed Vice Chairman Stanley Fischer and New York Fed President William C. Dudley both said the steepest decline in oil prices in five years will stimulate consumer spending. Corporate bond sales also diverted demand from government securities.
“The market seemed to turn on a dime with the ISM report,” said Michael Pond, head of global inflation-linked research at Barclays Plc, one of 22 primary dealers that trade with the Fed. “Dudley emphasized today that the drop in oil is likely good for consumer spending.”
The 10-year yield rose seven basis points, or 0.07 percentage point, to 2.24 percent as of 5 p.m. New York time, according to Bloomberg Bond Trader data, after reaching the lowest level since Oct. 21. The price of the 2.25 percent note due in November 2024 fell 20/32, or $6.25 per $1,000 face amount, to 100 1/8.
Thirty-year bond yields added seven basis points to 2.96 percent.
Hedge-fund managers and other large speculators reduced position that profit from a decline in 10-year bond futures, U.S. Commodity Futures Trading Commission data showed. Net-short positions totaled 75,327 as of Nov. 25, compared with 127,328 a week earlier.
Economists and strategists in a Bloomberg News survey estimate the U.S. 10-year yield will end the year at 2.5 percent, down from a forecast of 3.44 percent at the beginning of the year.
U.S. crude oil fell below $65 a barrel to the lowest level since July 2009 after the Organization of Petroleum Exporting Countries kept its production ceiling unchanged last week even as global demand fails to keep pace.
“I’m not very worried,” the Fed’s Fischer told an audience at the Council on Foreign Relations in New York. “The lower inflation that we’ll get from the lower price of oil is going to be temporary.”