Treasury 30-year bonds rose the most in seven weeks, paring losses incurred in a rout in the global debt market during the past week.
Bond yields had reached the highest level since November, mirroring a decline in German bunds. Record-low yields in Europe this year had sent international bond buyers into higher-yielding Treasuries until European yields began climbing last month along with oil prices. The drop in U.S. yields comes even as a report Friday is forecast to show a rebound in U.S. employment.
“We got to levels that triggered some really good buying.” said Thomas di Galoma, head of fixed income rates and credit at ED&F Man Capital Markets in New York. “We’ve probably seen the highs for quite some time,” he said, referring to yields.
Thirty-year bond yields dropped eight basis points, or 0.08 percentage point, to 2.91 percent at 5 p.m. New York time, according to Bloomberg Bond Trader data. The 2.5 percent securities maturing in February 2045 gained 1 17/32, or $15.31 per $1,000 face amount, to 91 27/32. Its yield touched the highest level since Nov. 24 before snapping a four-day decline and dropping the most since March 18.
The global rout that wiped out $436 billion in debt has helped push Bank of America Merrill Lynch’s MOVE Index higher for an seventh straight day. The measure of expected Treasury-market volatility, which is derived from over-the-counter options on Treasuries maturing in two to 30 years, rose to 90.99 Wednesday, the highest level since March 3.
“Any kind of movement will have exaggerated impacts on the market,” said James Sarni, a managing principal at investment manager Payden & Rygel, with $90 billion in assets under management. “We’re in the midst of a critical correction.”
Benchmark Treasury 10-year yields fell six basis points to 2.18 percent after climbing to 2.31 percent earlier Thursday, the most since Dec. 8. Germany’s 10-year bund yield jumped as much as 19 basis points to 0.78 percent, also the highest since Dec. 8, before trading at 0.59 percent.
That narrowed the extra yield, or spread, that investors get for holding the U.S. 10-year notes instead of German bunds to 159 basis points, the least since Feb. 6 based on closing-price data compiled by Bloomberg. The spread was 190 basis points on March 11.
“We’re seeing signs of value buyers,” said Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott LLC in Philadelphia, which manages $61 billion in assets. “Now that the German selling is slowing, we should see a bounce lower in yields.”
Treasuries lost 1.1 percent this month through Wednesday, outperforming their euro-area peers, which handed investors a 2.3 percent loss, according to Bloomberg World Bond Indexes. While Treasuries reflect skepticism that the economic recovery will be strong enough to enable the Fed to raise interest rates as early as September, investors in European bonds are rebelling against price increases that pushed yields to record lows.
Treasuries are bid ahead of a report tomorrow forecast to show nonfarm employment increased by 228,000 workers last month. The measure is the brightest spot among recent mixed economic data after a weak first quarter economic growth.
Crude oil futures dropped 3.4 percent to $58.85 a barrel in New York, paring a 50 percent rally since mid-March.