U.S., Japan, Australia Bonds Decline on Outlook for Fed Policy

U.S., Japanese and Australian bonds fell on concern the Federal Reserve will trim its debt purchases in the coming months.

Benchmark U.S. Treasury rates extended their climb to a 13-month high before the government sells $35 billion of five-year notes today. A two-year sale for the same amount yesterday drew the fewest bids since February 2011.

“There’s more selling left,” said Tomohisa Fujiki, an interest-rate strategist in Tokyo at BNP Paribas SA, whose New York unit is one of the 21 primary dealers that underwrite U.S. debt. “We can’t rule out another move” toward higher yields, he said.

U.S 10-year rates increased four basis points to 2.20 percent as of 2:02 p.m. in Tokyo, according to Bloomberg Bond Trader data. The price of the 1.75 percent note due in May 2023 slid 10/32, or $3.13 per $1,000 face amount, to 95 31/32. Yields touched 2.21 percent, the highest since April 2012.

Japan’s 10-year yield was as much as 0.965 percent. It rose to 1 percent last week, the highest level in more than a year.

Australia’s 10-year rate climbed 14 basis points to 3.47 percent. A basis point is 0.01 percentage point.

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