Treasury Bonds Fall in Longest Stretch Since 2007

Treasuries declined, pushing 30-year yields up for a sixth day in the longest stretch since 2007, as the U.S. prepared to auction $66 billion in notes and bonds this week.

Ten-year yields closed at an 11-month high before a retail sales report this week forecast to add to signs the U.S. economy is gaining momentum. Bets the Federal Reserve’s effort to spur growth is working damped demand for government bonds after data last week showed the jobless rate unexpectedly fell to a four-year low. Another report this week may show consumer prices increased for the first time in four months. Stocks rose.

“There’s been a very slow grind today to set up for the auctions,” said Jason Rogan, director of U.S. government trading at Guggenheim Partners LLC, a New York-based brokerage for institutional investors. “There seems to be enough interest in the market; 2.05 and 2.06 percent will bring in enough interest. A lot of people out there have been a little eager to see strong growth in the U.S. economy.”

Thirty-year bond yields rose two basis points, or 0.02 percentage point, to 3.26 percent at 5 p.m. in New York, according to Bloomberg Bond Trader data. The price on the 3.125 percent securities maturing in February 2043 dropped 9/32, or $2.81 per $1,000 face amount, to 97 14/32. The yield increased as much as three basis points to 3.27 percent today. They last rose for six straight days in May 2007.

Benchmark 10-year note yields increased two basis points to close at 2.06 percent, the highest since April 5, 2012. They touched 2.07 percent, approaching the 11-month intraday high of 2.08 percent they reached on March 8.

U.S. stocks rose, with the Dow Jones Industrial Average reaching a record high for a fifth straight day.

Yield Curve

The difference between the yields on two-year and 10-year notes, called the yield curve, increased to as much as 1.82 percentage points, approaching the widest since April 2012. It averaged 1.5 percentage points over the past year.

Treasury securities due in 10 years and more are trading at the cheapest level since 2011 relative to global peers with similar maturities, Bank of America Merrill Lynch indexes show. Yields on the Treasuries were 54 basis points higher on March 8 than those in an index of other sovereign debt due in 10 years and more, the indexes show. It was the most since August 2011.

The U.S. will sell $32 billion in three-year notes tomorrow. The previous three-year note sale, an offering of the same size on Feb. 12, drew a yield of 0.411 percent, compared with a forecast of 0.409 percent in a Bloomberg News survey of seven of the Fed’s 21 primary dealers. The record-low three-year auction yield of 0.327 percent was reached Dec. 11.

Demand Gauge

The Feb. 12 auction’s bid-to-cover ratio, which gauges demand by comparing total bids with the amount of notes offered, was 3.59, matching the average for the previous 10 sales.

The Treasury will auction $21 billion of 10-year securities March 13 and $13 billion of 30-year bonds the next day.

“The supply this week is the big thing,” said Thomas Roth, senior Treasury trader in New York at Mitsubishi UFJ Securities USA Inc.

U.S. retail sales advanced in February for a fourth month, rising 0.5 percent, according to the median estimate of economists in a Bloomberg News survey before the Commerce Department reports the data on March 13. they gained 0.1 percent in January.

The U.S. cost of living rose 0.5 percent in February, economists forecast a March 15 report from the Labor Department will show. It was little changed in January and December and dropped in November.

‘Overwhelmingly Strong’

“The data has been overwhelmingly strong,” Roth said. “The Fed is obviously lowering rates and helping the economy, and that’s what’s going on.”

U.S. government securities maturing in more than a year lost 0.3 percent in the past month, according to data compiled by Bloomberg and the European Federation of Financial Analysts Societies.

Treasury yields climbed 20 basis points in the five days ended March 8, the biggest weekly gain in a year, amid the stronger-than-forecast employment report. U.S. payrolls increased by 236,000 jobs last month, versus the 165,000 that economists forecast. The unemployment rate fell to 7.7 percent, from 7.9 percent.

The Fed purchased $1.46 billion today in Treasuries due from February 2036 to February 2043.

The U.S. central bank has been buying $85 billion of Treasury and mortgage bonds each month under the quantitative-easing stimulus strategy since the start of the year. The effort is designed to try to hold down borrowing costs and encourage economic growth.

Volume Rises

The central bank has also kept its benchmark interest-rate target for overnight lending between banks in a range of zero to 0.25 percent since 2008 to support the economy.

Policy makers reiterated after their January meeting the rate will stay low as long as unemployment is above 6.5 percent and inflation is projected at no more than 2.5 percent. The Federal Open Market Committee meets next on March 19-20.

Trading volume dropped 52 percent today to $184 billion, the least since touching the 2013 low of $183 billion on March 4, according to ICAP Plc, the largest inter-dealer broker of U.S. government debt. Volume increased to $384 billion on March 8, the highest since Feb. 26. Average daily Treasuries volume for the past year was $248 billion.

Before it's here, it's on the Bloomberg Terminal.