Treasuries climbed for a third day before a report economists said will show U.S. consumer prices declined at the steepest rate in five years last month.
The U.S. inflation rate fell 0.2 percent in April from a year earlier, according to the median forecast of analysts in a Bloomberg survey before the Labor Department reports the figure at 8:30 a.m. in Washington. The securities were still set for a weekly decline, even after advancing every day since minutes of the Federal Reserve’s April meeting released on May 20 signaled it is unlikely to raise interest rates in June.
Investors looking at the CPI data are “probably going to focus on whether we have found a bottom for the headline figure,” said Owen Callan, a fixed-income strategist at Cantor Fitzgerald LP in Dublin, “Obviously that is not going to be something which is going to be putting pressure on the Fed to hike right now, or in the next few months. U.S. 10-years have been stuck in this 2.15 percent to 2.30 percent range for the last couple of weeks.”
The benchmark Treasury 10-year yield fell two basis points, or 0.02 percentage point, to 2.17 percent at 6:59 a.m. New York time, according to Bloomberg Bond Trader data. The yield dropped 10 basis points in the previous two days. The 2.125 percent note due in May 2025 rose 7/32, or $2.19 per $1,000 face amount, to 99 5/8. The yield is up two basis points since May 15.
The Treasury Department sold $13 billion sale of 10-year inflation-linked debt at an auction Thursday, with a bid-to-cover ratio, which gauges demand by comparing the amount bid with the amount offered, of 2.33, compared with an average of 2.48 at the past 10 sales.
The securities were priced to yield 0.358 percent, compared with an average forecast of 0.351 percent in a survey of six primary dealers. The sale was rated a “three” on a scale of one through five by five of the Fed’s 22 primary dealers.
Treasury Inflation Protected Securities, or TIPS, pay interest at lower rates than regular Treasuries on a principal amount that’s linked to the Labor Department’s consumer-price index. The Treasury Department is scheduled to sell two-, five-and seven-year debt as well as two-year floating rate notes over three days starting May 26.