Treasury Yields Hold Close to One-Month Low as Stocks Advance

  • Inflation outlook for next five years reaches below 1%
  • Ten-year note yield declines to lowest since Aug. 26

Treasury yields held close to a one-month low as an advance in U.S. stocks limited demand for the relative safety of the U.S. government securities.

Sovereign debt has benefited as global stock markets fell in the past week, while the inflation outlook has tumbled on concern that slowing economic growth in China will curb worldwide expansion.

“Treasuries are highly correlated with risk sentiment right now,” said Allan von Mehren, chief analyst at Danske Bank A/S in Copenhagen.

The benchmark U.S. 10-year note yielded 2.07 percent as of 11:30 a.m. in New York, according to Bloomberg Bond Trader data. It touched 2.06 percent, the lowest since Aug. 26. The price of the 2 percent security due in August 2025 was 99 3/8.

U.S. stock benchmarks rose in morning New York trading. The Standard & Poor’s 500 Index fell the past five days.

Market turmoil and the declining inflation outlook helped push back bets on when the Federal Reserve will raise interest rates, providing a further boost to Treasuries.

The difference between yields on five-year notes and similar-maturity Treasury Inflation Protected Securities, a gauge of expectations for consumer prices over the life of the debt, touched 0.98 percentage point, the lowest since 2009.

Traders see a 40 percent probability that the Fed raises rates by the December meeting, down from 60 percent a month ago, according to futures data compiled by Bloomberg. The calculation is based on the assumption that the effective fed funds rate will average 0.375 percent after liftoff.

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