Treasury 10-year notes traded in the narrowest range in more than two weeks as the U.S. government prepared to sell $72 billion in coupon-bearing securities this week.
U.S. debt yields climbed earlier today before the government sells $32 billion of three-year notes tomorrow, $24 billion in 10-year debt the following day and $16 billion in 30-year bonds on Feb. 14. U.S. President Barack Obama intends to use his State of the Union address this week to focus on job creation, marking a renewed emphasis on economic issues.
“We are stuck here for now,” said Ian Lyngen, a government-bond strategist at CRT Capital Group LLC in Stamford, Connecticut. “The economic picture is still muddled and we have supply to accommodate this week at higher yield levels, which brings up the question where rates need to be to accommodate the auction.”
The 10-year yield rose one basis point, or 0.01 percentage point, to 1.96 percent as of 5 p.m. in New York, according to Bloomberg Bond Trader prices, after rising as much as three basis points, within the narrowest range since Jan. 23. The 1.625 percent note due in November 2022 fell 1/8, or $1.25 per $1,000 face amount, to 97. The yield declined seven basis points last week.
Treasuries handed investors a 0.8 percent loss this year through Feb. 8, compared with a 0.5 percent decline for an index of government bonds around the world, according to Bank of America Merrill Lynch data. The benchmark 10-year yield climbed to 2.06 percent on Feb. 4, the highest level since April 12.
“We are moving around in a tight range,” said Paul Horrmann, a broker in New York at Tradition Asiel Securities Inc., an interdealer broker. “The market wanted higher rates, but we are stuck between 1.95 percent and 2.05 percent until we see more of the complexion of the state of the economy.”
Treasury trading volume was $197.5 billion, according to ICAP Plc, the largest inter-dealer broker of U.S. government debt, the lowest level since Jan. 7 and was below the daily volume average of $240 billion in 2012.
The Fed bought $1.4 billion in securities maturing from February 2036 to May 2042.
The U.S. last sold 10-year notes on Jan. 9 at a yield of 1.863 percent. Investors submitted orders for 2.83 times the amount on offer, down from 2.95 times in December.
“I expect us to back up a bit going into the auctions,” said Brian Edmonds, head of interest rates at Cantor Fitzgerald LP in New York, one of 21 primary dealers that trade with the Federal Reserve. “These are fairly attractive yields. Threes should go great. Tens and bonds will go fine.”
President Obama previewed his Feb. 12 State of the Union address in remarks before House Democrats meeting in Virginia last week, where he advocated “an economy that works for everybody.”
“I’m going to be talking about making sure that we’re focused on job creation here in the United States of America,” the President said.
European finance chiefs were set to meet in Brussels today as a tightening election contest in Italy and corruption allegations in Spain threaten to reignite the region’s debt crisis. Ministers and central bankers from the Group of 20 will gather in Moscow later this week.
Germany is losing a yearlong borrowing-cost advantage over the U.S. as German securities had their worst January since at least 1986 and options traders hold almost three times more bets on further declines than a rally, according to data compiled by Bloomberg. That contrasts with Treasuries, where wagers through derivatives are about even. JPMorgan Chase & Co. says Germany’s 10-year yields will exceed U.S. rates for the first time since February 2012 by the end of the third quarter.
Demand for the euro area’s benchmark assets is waning after European Central Bank President Mario Draghi dispelled concern the bloc may break up and as banks pay back emergency loans two years earlier than required.
The 10-year note will yield 1.96 percent at the end of June and 2.24 percent by Dec. 31, according to the weighted average forecast of economists in a Bloomberg survey.