Bloomberg -- Treasury 10-year note yields approached the highest level in two years before the Federal Reserve releases minutes of its July meeting that may contain signals on when policy makers plan to curtail monetary stimulus.
Benchmark 10-year yields briefly extended gains as an industry report showed sales of previously owned U.S. homes climbed in July to the fastest pace in almost four years. Treasuries advanced yesterday as speculation a withdrawal of stimulus will hurt emerging-market economies stoked demand for the safety of U.S. government debt.
Bonds might creep higher into the release of the minutes due to anxiety issues, said Adrian Miller, director of fixed- income strategy at GMP Securities LLC in New York. Two weeks of Fed-speak have laid the foundation for a board that is predisposed to a September tapering.
The Treasury 10-year yield rose three basis points, or 0.03 percentage point, to 2.85 percent at 10:59 a.m. in New York, according to Bloomberg Bond Trader prices. The 2.5 percent note due in August 2023 fell 1/4, or $2.50 per $1,000 face amount, to 97. The yield reached 2.86 percent after climbing on Aug. 19 to 2.90 percent, the highest since July 2011.
The 30-year bond yield increased three basis points to 3.88 percent after rising to 3.91 percent on Aug. 19, the most since August 2011.
The difference between the yields on five-year notes and benchmark 10-year securities widened to the most in two years, suggesting investors are betting faster growth will lead to higher long-term borrowing rates. The gap touched 1.28 percentage points, the widest since August 2011.
The minutes of the Feds July 30-31 meeting are scheduled to be published at 2 p.m. New York time and may offer clues on when policy makers will start reducing their $85 billion of monthly bond purchases under the quantitative-easing stimulus strategy.
Policy makers will probably vote at their Sept. 17-18 meeting to trim the program, according to 65 percent of economists surveyed by Bloomberg between Aug. 9-13. The Fed now buys $45 billion of Treasuries and $40 billion of mortgage- backed securities each month. The first tapering step may be to cut purchases of each set of securities by $5 billion, according to the survey.
Bill Gross, Pacific Investment Management Co.s founder and co-chief investment officer, said the conclusion of quantitative easing will end bull markets.
No more QEs? No more bull markets, Gross wrote in a Twitter post.
Treasury 10-year yields will reach 3.25 percent by year-end as the Fed begins slowing its stimulus, said Vincent Chaigneau, global head of rates and foreign-exchange strategy at Societe Generale SA in Paris.
Purchases of previously owned houses advanced 6.5 percent to a 5.39 million annual rate last month, figures from the National Association of Realtors showed today in Washington. The median forecast of 76 economists surveyed by Bloomberg projected a 5.15 million pace. Prices increased 13.7 percent from a year earlier.
U.S. home prices climbed 2.45 percent in the second quarter, based on responses from economists before the report tomorrow from the Federal Housing Finance Agency.
Treasury losses this month are being matched by declines in mortgage-backed securities as the Fed prepares to reduce purchases of both securities.
U.S. sovereign and mortgage bonds have fallen 0.9 percent in August as of yesterday, according to Bank of America Merrill Lynch indexes. While both declined in May, June and July, Treasuries dropped more each time. Thirty-year fixed mortgage rates rose to 4.59 percent this week, approaching the highest level since May 2011, according to Bankrate.com.
Treasury 10-year yields, a benchmark for both mortgages and corporate bonds, will increase to 2.71 percent by year-end, according to a Bloomberg survey of financial companies with the most recent projections given the heaviest weightings.
Thirty-year yields will rise to 3.73 percent by Dec. 31, a separate survey showed.