Treasuries Decline After Fed Economic Views Damp Refuge Demand

  • Stocks and crude oil advance as investors seek riskier assets
  • Government completes $58 billion of note and bond auctions

Treasuries fell on reduced haven demand after minutes of the Federal Reserve’s Sept. 16-17 meeting showed policy makers expressed confidence in the economy’s growth prospects, while opting to wait to determine the impact of turmoil overseas on the U.S.

The benchmark 10-year yield reached a one-week high as the minutes showed central bankers still expect to raise rates this year, after keeping the benchmark near zero in September. Stocks rose as crude oil reached $50 a barrel for the first time since July 22.

“The bar is going to be pretty low for them to raise interest rates 25 basis points in December, and then wait and see what happens after that," said Thomas Simons, a government-debt economist in New York at Jefferies Group LLC, one of the 22 primary dealers that are obligated to bid at U.S. debt sales.

The Treasury 10-year note yield climbed four basis points, or 0.04 percentage point, to 2.11 percent as of 5 p.m. New York time, according to Bloomberg Bond Trader data. The 2 percent security due in August 2025 fell 10/32, or $3.13 per $1,000 face amount, to 99 2/32. The yield rose as high as 2.12 percent Thursday. It had been as low as 1.90 percent on Oct. 2.

Market Measure

Interest-rate futures are pricing in a 39 percent likelihood of an increase by December, and a 61 percent probability of a move by March. The futures market first made March the most likely candidate for the lift-off date on Sept. 22. The calculations are based on the assumption that the effective fed funds rate will average 0.375 percent after liftoff, versus the current target range of zero to 0.25 percent.

The Treasury sold $13 billion of 30-year bonds today at a yield of 2.914 percent, less than the 2.915 percent level forecast in a Bloomberg News survey. It was the third sale this week totaling $58 billion.

Investors submitted bids amounting to 2.46 times the 30-year debt sold, compared with an average 2.35 times at the previous 10 sales. Indirect bidders, a group including mutual funds and foreign central banks, bought 56.4 percent versus a record 66 percent at last month’s offering.

The Bloomberg U.S. Treasury Bond Index has gained 1.8 percent this year, compared with a 6.2 percent advance in 2014.

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