Fed Official Cautions on QE as Treasuries Fall a 5th Day Before Sales

(Bloomberg) -- Treasuries fell for a fifth day, reversing earlier gains, before the U.S. government sells $64 billion of notes and bonds this week.

U.S. securities also dropped as Federal Reserve Bank of Philadelphia President Charles Plosser said officials must be aware of the risk of loose monetary policy. Employment gains in the U.S. last week added to speculation the Fed will continue trimming the debt purchases it uses to support the economy. The Fed’s next policy meeting is March 18-19. Treasuries rose earlier as China reported the biggest trade deficit in two years, driving demand for the safety of U.S. debt.

“While there’s safe-haven demand for Treasuries, that won’t prevent yields from going up,” said Peter Osler, head of rates strategy at Marex Spectron Group Ltd. in London. “The economic recovery in the U.S. means rates will have to go up at some point, and it could happen sooner than what’s currently priced in by the market.”

U.S. 10-year yields rose one basis point, or 0.01 percentage point, to 2.80% at 8:01 a.m. New York time after falling as much as three basis points earlier. The 2.75% security due February 2024 fell 2/32, or 63 cents per $1,000 face amount, to 99 19/32.

The yield advanced to 2.82% on March 7, the highest level since Jan. 23. It was 115 basis points more than 10-year German bunds, the most in seven years.


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