Treasury 10-year note yields approached the lowest level of the year after a government report showed orders for U.S. durable goods fell in March by the most in seven months, boosting demand for the safest assets.
Treasury 10-year notes fell for a second quarter, the first back-to-back drop in two years, as investors sought higher-yielding assets amid improved economic data and a Federal Reserve pledge to maintain monetary stimulus.
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.
Treasury 10-year notes fell for a second day as Federal Reserve Chairman Ben S. Bernanke stoked speculation the central bank’s monetary stimulus would bolster economic growth, diminishing the desire for safety.
Treasury 10-year note yields had their biggest weekly gain in a year as U.S. employers added more jobs than forecast and services industries climbed, signaling the Federal Reserve’s stimulus efforts may be gaining traction.
Even after the worst start for Treasuries since 2009, derivatives traders are signaling there’s little chance of a bear market in bonds for the next three years as Federal Reserve Chairman Ben S. Bernanke fights unemployment.
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.