Treasury Volatility Climbs as Economy Keeps Investors Guessing

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Price swings in the Treasury market are the widest in a month as investors weigh conflicting measures of the economy.

U.S. debt fell after a report showed the services economy unexpectedly grew at a faster pace last month. Treasuries swung between gains and losses earlier after a report showed the U.S. trade deficit widened in March to the most in more than six years.

Treasury 10-year yields rose four basis points, or 0.04 percentage point, to 2.19 percent as of 10:07 a.m. New York time, according to Bloomberg Bond Trader prices. The benchmark 2 percent note maturing in February 2025 traded at 98 11/32.

The yield increased 11 basis points during the previous two days and earlier on Tuesday touched the highest since March 10. The Bank of America Merrill Lynch’s MOVE Index, derived from over-the-counter options on Treasuries maturing in two to 30 years, rose to 81.12 on Monday, the highest level since April 2.

Treasuries fluctuated earlier as investors focused on unexpectedly weak U.S. trade data, the improvement in European inflation expectations, the timing for the Federal Reserve’s first rate increase since 2006.

“The economy is not so strong, but the Fed’s next policy move is not obvious,” said Jim Vogel, head of interest-rate strategy at FTN Financial in Memphis, Tennessee. “New concerns can move the market quickly.”

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