U.S. Treasury 5-Year Notes Extend Longest Drop This Year

Treasury five-year notes extended the longest losing streak this year as traders bet improving economic data will push the Federal Reserve to raise rates as early as July 2015.

The gap between five- and 30-year yields narrowed to almost the least in five years before the Federal Open Market Committee meets next week to discuss a stimulus-exit strategy. The chance of a rate increase to 0.5 percent or more by the end of next July is 58 percent, according to data compiled by Bloomberg based on federal fund futures, up from 43 percent at the end of last month. Long bonds rose as investors reached for higher yields amid U.S. data showing low inflation and unrest in Iraq.