Treasury 10-Year Yields Rise to 2% for First Time Since April

Treasury benchmark 10-year yields rose to 2 percent for the first time since April as signs of improvement in the global economy cut demand for the relative safety of U.S. debt.

Treasuries have handed investors a 0.9 percent loss in January, the worst monthly performance since March, according to Bank of America Merrill Lynch indexes. The MSCI All-Country World Index of shares gained 5.4 percent in January including reinvested dividends, according to data compiled by Bloomberg.

Benchmark 10-year yields fell to 1.99 percent as of 8:49 a.m. in New York, according to Bloomberg Bond Trader data. The price of the 1.625 percent security due in November 2022 fell 12/32 to 96 23/32. The rate is still less than the average over the past decade of 3.64 percent.

Yields climbed last week when the European Central Bank said lender will repay more of its loans than forecast, spurring optimism the worst of the region’s debt crisis is over.

The ECB said lenders will pay back 137.2 billion euros ($184.7 billion) of its three-year loans, so-called Longer-Term Refinancing Operations, this week. The figure compares with the median forecast of 84 billion euros in a Bloomberg survey of economists.

In the U.S., employers probably added 160,000 workers in January, after a 155,000 increase in December, based on Bloomberg News survey of economists before the Labor Department reports the figures on Feb. 1.

Central Banks

Federal Reserve policy makers said they may end their $85 billion monthly bond purchases sometime in 2013, with members divided between a mid- or end-of-year finish, according to the record of the Federal Open Market Committee’s Dec. 11-12 gathering.

Central banks in the U.S., the U.K. and Japan are all buying bonds to pump money into their economies as they try to spur growth. The European Central Bank has indicated it is willing to do so.

“It should be possible to withdraw the additional credit as the economy gets going,” billionaire investor George Soros said in a Bloomberg News interview Jan. 26 at the World Economic Forum annual meeting in Davos, Switzerland. “But it hasn’t been done yet, and therefore there’s a fear that this could result in runaway inflation.”

The difference between yields on U.S. 10-year notes and same-maturity Treasury Inflation Protected Securities, a gauge of trader expectations for consumer prices over the life of the debt, widened to 2.56 percentage points last week. The average over the past decade is 2.19 percentage points.

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