Treasury Yields Trade at Almost 2-Year Highs Before Fed Minutes

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 Fed’s 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.


Get access to this article and thousands more...

All Financial Planning articles are archived after 7 days. REGISTER NOW for unlimited access to all recently archived articles, as well as thousands of searchable stories. Registered Members also gain access to exclusive industry white paper downloads, web seminars, blog discussions, the iPad App, CE Exams, and conference discounts. Qualified members may also choose to receive our free monthly magazine and any of our daily or weekly e-newsletters covering the latest breaking news, opinions from industry leaders, developing trends and growth strategies.

Already Registered?

Comments (0)

Be the first to comment on this post using the section below.

Add Your Comments:
Not Registered?
You must be registered to post a comment. Click here to register.
Already registered? Log in here
Please note you must now log in with your email address and password.

Already a subscriber? Log in here