Treasuries rose, pushing 10-year note yields down from four month highs, and ending a nine-day decline that was the longest run of losses since 2006, as yields climbed to levels that lured investors.
Yields on the 30-year bond dropped from the highest levels since September before the Federal Reserve buys as much as $2.25 billion of Treasuries maturing from February 2036 to February 2042. China raised fuel prices, sparking concern its domestic growth may slow and boosting demand for U.S. government debt.
“The selling has been overdone,” said Paul Horrmann, a broker at Tradition Asiel Securities Inc., an interdealer broker in New York. “We’re in for a correction. The market has paused as it got closer to the 2.4 percent level.”
Yields on 10-year notes fell three basis points, or 0.03 percentage point, to 2.35 percent at 8:35 a.m. New York time, according to Bloomberg Bond Trader prices. The 2 percent securities maturing in February 2022 rose 8/32, or $2.50 per $1,000 face amount, to 96 30/32. The yields increased yesterday to 2.39 percent, the highest level since Oct. 28.
While 10-year Treasury yields were up 27 basis points last week, they’re still below last year’s high of 3.77 percent and their average of 3.87 percent over the past decade.
The 14-day relative strength index for 10-year yields was 72.2 today, exceeding 70 for a fifth day. A reading above that level indicates to some traders that a gain in the yields may be hard to sustain.
“Yields overshot,” said Will Tseng, who trades Treasuries at Taipei-based Shin Kong Life Insurance Co., which has the equivalent of $52.1 billion in assets. “I will definitely jump in” if yields rise further. Tseng said he is planning to buy 10-year notes at 2.4 percent.
Thirty-year bond yields dropped four basis points to 3.44 percent. They reached 3.49 percent yesterday, the highest level since Sept. 2.
German 10-year bunds rose, with yields dropping two basis points to 2.03 percent. The Stoxx Europe 600 Index fell 0.9 percent, and futures on the Standard & Poor’s 500 Index expiring in June slid 0.6 percent.
Housing starts in the U.S. fell in February from a three- year high, showing the recovery in the residential real estate market will take time to develop.
Builders broke ground on 698,000 homes at an annual rate, in line with the median forecast of economists surveyed by Bloomberg News and down 1.1 percent from a January pace that was stronger than previously reported, Commerce Department figures showed today. Building permits, a proxy for future construction, climbed to the highest level since October 2008.
The Fed raised its assessment of the economy last week while reiterating its plan to keep the target lending rate at virtually zero through at least late 2014.
This month’s sell-off in Treasuries presents opportunities for resuming trades that bet the central bank will stay on hold, Barclays Plc strategists Anshul Pradhan and Vivek Shukla wrote in a report today.
“The market is being too aggressive in pricing in the Fed hiking cycle, and we recommend long positions in the front end of the U.S. rates curve,” they wrote. “We recommend being long two-year notes.” A long is a bet an asset will gain in value.
The two-year note yield, currently at 0.37 percent, will fall to 0.25 percent, the strategists wrote.
Treasuries rose earlier as BHP Billiton Ltd., the world’s largest mining company, said China’s steel production is slowing, underpinning demand for the safest assets.
Treasuries have lost 2.1 percent in 2012 after returning 10 percent last year, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. German bunds have lost 1.3 percent this year, the indexes show.
Bank of America Merrill Lynch’s MOVE index, which measures price swings based on options, rose yesterday to 92.3 basis points, the highest level this year.
To contact the reporters on this story: Susanne Walker in New York at swalker33@bloomberg.net; Emma Charlton in London at echarlton1@bloomberg.net
To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net
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