U.S. stocks erased gains as investors sold equities in the final 30 minutes of trading before changes to MSCI Inc. indexes, trimming an earlier rally after improved housing data. Treasuries advanced while Europe’s benchmark gauge fell for the first time in three days.
Treasuries rose for a fourth day as the government’s auction of $35 billion in five-year notes attracted stronger-than-forecast demand as investors bet the Federal Reserve will keep short-term borrowing rates low.
Treasuries gained after the government’s $36 billion auction of two-year notes drew the highest level of demand since August 2007 as investors speculated the Federal Reserve will buy more government bonds.
Treasury 10-year yields fell below 2 percent as inflation last month trailed the Federal Reserve’s 2 percent long-term objective, giving the central bank scope to continue bond buying to bolster the economy.
Treasury 10-year note yields traded at almost the highest level in 13 months as the U.S. prepared to sell $29 billion of seven-year securities and traders speculated whether the Federal Reserve will consider reducing stimulus.
Treasuries rose, pushing yields to the lowest level since December, as Federal Reserve Chairman Ben S. Bernanke ’s comments yesterday that record monetary stimulus is still needed bolstered demand at today’s $21 billion auction of 10-year notes.