The Federal Reserve will make greater use of its reverse-repurchase agreement facility while policy makers shift focus to rate guidance from asset purchases, according to the central bank’s former markets group head.
Treasury 10-year notes declined for the first time in three days amid speculation a rally that pushed yields to a three-month low amid tumbling emerging markets and weaker U.S. data is losing momentum.
Money market rates, which surged during the debate to raise the federal borrowing cap, dropped below zero percent as Europe’s sovereign-debt crisis bolstered U.S. government securities’ appeal as the world’s safest assets.
The rate to borrow and lend U.S. government securities rose to an almost two-week high as demand for repurchase agreements declined after MF Global Holdings Ltd. declared bankruptcy and more securities entered the marketplace following auction settlements.
Treasury 10-year notes will become less coveted in the short-term market for borrowing and lending the securities by next week as the government sells more of the debt, according to Bank of America Corp. and Barclays Plc.