Treasuries rose the most in almost two weeks, pushing the 10-year note yield further below the level when the Federal Reserve voted last month to taper its bond purchases, as reports showed an uneven economic expansion.
Treasury 10-year note yields hovered at almost a six-week low as investors weighed whether the U.S economic recovery is strong enough for the Federal Reserve to make more cuts to its debt-purchase program.
Royal Bank of Scotland Group Plc.’s William O’Donnell, head of the lender’s U.S. treasury strategy, said he sees a 60 percent chance that the Federal Reserve will begin cutting its $85 billion monetary stimulus plan in March.
The Federal Reserve may have understated the staying power of negative effects on U.S. economic growth, according to William O’Donnell, head U.S. government bond strategist at Royal Bank of Scotland Group Plc.
U.S. government debt is becoming increasingly perilous to options traders who are pushing up the cost to protect against sudden losses by the most in a year, even as Federal Reserve stimulus suppresses volatility.
Treasuries maturing in 3 1/2 to 4 years represent the “sweet spot” in the government bond market because they offer relatively attractive yields and greater protection than longer-maturity debt as yields fluctuate, according to RBS Securities Inc.’s William O’Donnell .
Investors should heed the views of the Federal Reserve on the state of the economy and the need for more debt purchases because “so far they have been right,” according to William O’Donnell of Royal Bank of Scotland Plc.