Treasuries rose, breaking the longest streak of weekly losses since 2009, amid skepticism the Federal Reserve is about to slow its bond-buying program designed to hold down borrowing costs and spur the economy.
Ever since Standard & Poor’s stripped the U.S. of its AAA credit rating almost two years ago, the unemployment rate has fallen, household wealth has reached a record and the budget deficit is shrinking. More downgrades may be coming, anyway.
The Treasury’s $21 billion sale of 10-year notes may draw a yield of 2.195 percent, the highest since October 2011, according to the average forecast in a Bloomberg News survey of eight of the Federal Reserve’s 21 primary dealers.
The Treasury’s $21 billion 10-year note auction attracted the least demand since August, the second consecutive sale of coupon debt this week to be hampered by concern the Federal Reserve will slow its asset purchases.
Mutual-fund investors pulling the most funds since December from the $3.7 trillion municipal market are creating an opportunity for buyers of individual local bonds as tax-exempt yields reach a 15-month high.
Investors should get used to U.S. Treasury yields rising toward 4 percent as the 30-year bull market in bonds comes to an end, according to Jim O’Neill, former chairman of Goldman Sachs Asset Management.
Treasuries dropped on concern the biggest monthly surge in yields since December will prompt investors to sell government debt as a hedge against losses on mortgage bonds as borrowing costs climb to a 14-month high.