Maybe Treasuries investors should have spent April in Paris.
U.S. government debt fell on the month, dragged down by speculation the Federal Reserve was prepared to raise interest rates this year as a rout swept across European bonds, lessening the appetite for relatively higher U.S. yields. The dollar dropped for a third week as investors shunned U.S. assets.
“It’s a combination of everything,” said Sean Simko, who oversees $8 billion at SEI Investments Co. in Oaks, Pennsylvania. “We’ve seen a big move in Europe, we’ve seen a move in currencies, all in the same breath as inflation being well below the Fed target. It puts volatility in the mix, and volatility is here to stay until more data comes out to present a clearer picture.”
The Treasury 10-year yield fell less than one basis point, or 0.01 percentage point, to 2.03 percent as of 5 p.m. New York time after reaching 2.11 percent, the highest since March 13, according to Bloomberg Bond Trader data. The price of the benchmark 2 percent note due in February 2025 was 99 23/32.
The U.S. 10-year yield climbed 11 basis points in April.
Volatility rose a third day, closing at the highest level since April 13, according to Bank of America Corp.’s MOVE Index.
German 10-year bund yields rose eight basis points to 0.36 percent, adding to a 12 basis-point jump on Wednesday that was the most in two years. That has pushed the extra yield that investors get for holding similar-maturity Treasuries down to 167 basis points, from 184 basis points on Tuesday, which was the most since March 13.
“I didn’t like this whole selloff, but with the bund getting whacked, it’s likely here to stay for a little bit,” said Aaron Kohli, an interest-rate strategist with BNP Paribas SA in New York. He cited month-end index rebalancing for late-session buying Thursday, because with the recent declines in Treasuries, “there’s no upside to buying it early. So they wait until the last minute.’”
In a statement after a two-day meeting ended on Wednesday, Chair Janet Yellen and her colleagues reiterated their belief that growth will pick up to a “moderate pace.” Policy makers also repeated that they will raise interest rates when there’s evidence of further improvement in job creation and they are “reasonably confident” that inflation will quicken back toward their 2 percent goal over time.
“The key is what happened with the Fed,” said Larry Milstein, managing director in New York of government-debt trading at R.W. Pressprich & Co. “They still anticipate inflation to meet their target. We are still expecting a Fed hike in September, but we’re data dependent.”
A report today showed first-time filings for unemployment insurance fell by 34,000 to 262,000 in the week ended April 25, the lowest since April 15, 2000, a Labor Department report showed Thursday in Washington. Consumer purchases rose 0.4 percent, the biggest increase since November, Commerce Department figures showed Thursday in Washington.
A separate report showed the Institute for Supply Management-Chicago Inc.’s business barometer increased to 52.3 in April from 46.3 the prior month. Readings greater than 50 signal growth.