Facing the risk of a fourth straight summertime slowdown, Federal Reserve officials raised the prospect of increasing the monthly pace of bond buying above $85 billion to guard against any slump in growth or employment.
Treasury 10-year notes rallied to finish little changed as weaker-than-forecast economic data dashed speculation the Federal Reserve might end stimulus measures anytime soon, driving investors into government debt.
Treasury Secretary Timothy F. Geithner takes comfort from the government’s ability to borrow at low interest rates as the budget deficit hits a record high. “There’s a lot of confidence” in America’s capacity to meet its commitments, he told Bloomberg Television.
Treasuries rose, with yields slipping from almost 11-month highs, as a government report showed U.S. inflation was contained, giving the Federal Reserve scope to maintain its monetary-stimulus program.
Jay Mueller, who manages $3 billion of bonds for Wells Capital Management in Milwaukee, resisted buying Treasuries for four months, anticipating the Federal Reserve would drop its pledge to keep interest rates at a record low through late 2014.
The sudden slowdown in U.S. inflation has left Treasuries at the cheapest levels in almost two years, aiding the Federal Reserve’s efforts to tamp down long-term borrowing costs while the economy improves.
Treasuries rose, pushing the two- year note’s yield to the lowest level this year, as the Federal Reserve signaled that European indebtedness may harm America’s growth and a report showed new home sales plunged.
Treasuries rose for a second week as Americans prepared to choose a president who will face unprecedented debt levels and the so-called fiscal cliff, which threaten to derail an economy hobbled by elevated unemployment.
Treasury Secretary Timothy F. Geithner has signaled to White House officials that he’s considering leaving the administration after President Barack Obama reaches an agreement with Congress to raise the federal debt limit, according to three people familiar with the matter.