Treasuries slid, pushing 10-year yields to the highest level since September, as industry data showed job growth accelerated more than forecast, adding to bets the Federal Reserve may reduce bond purchases this month.
As investors sought a refuge from inflation in August amid concern about Federal Reserve efforts to prop up the U.S. economy, David Brownlee was buying the securities most vulnerable to rising consumer prices.
The worst first half for Treasuries in four years has wrung the unprecedented Federal Reserve stimulus out of bond prices as investors now look to low inflation and slow economic growth to contain yields.
Treasuries gained for a second week as reports that showed consumer prices excluding food and fuel were unchanged and jobless claims unexpectedly rose spurred speculation the Federal Reserve will keep rates low.
The risk of owning U.S. government debt is as great as any time since the 1950s with yields at the year’s lows and Treasury Secretary Timothy F. Geithner locking in borrowing costs by selling longer-term securities.
The Federal Reserve will remain the biggest buyer of Treasuries, even after the second round of quantitative easing ends this week, as the central bank uses its $2.86 trillion balance sheet to keep interest rates low.