Bonds Decline From U.S. to Japan, Extending Global Debt Selloff

U.S., European and Japanese bonds are falling as governments in some of the biggest markets sell debt amid a rout in fixed-income securities.

The global selloff is intensifying after pushing U.S. and German 10-year yields to the highest level this year. U.S. 30-year bond yields rose the most since 2013 Monday even as overall Treasury market volatility was on par with this year’s average. The Treasury will auction $24 billion of three-year notes Tuesday.

“We’ve got at least another week to go for the selloff,” said Jim Vogel, an interest-rate strategist at FTN Financial. “The technicals and the damage are reinforcing the idea for more people to sit on the sidelines or sell.”

Treasury 10-year yields rose one basis point, or 0.01 percentage point, to 2.29 percent as of 7:03 a.m. New York time, and touched 2.35 percent, reaching the highest level since Nov. 20. The benchmark 2 percent security due in February 2025 traded at 97 15/32.

Japanese 10-year bond yields increased six basis points to 0.45 percent and Australia’s added 19 basis points to 3.05 percent. Germany’s 10-year bund yield rose 10 basis points to 0.71 percent, up from a record-low 0.049 percent reached on April 17.

Demand Falls

“It all sounds like we’re absolutely doomed in the bond markets, but I think it is a realization that’s hitting bond investors that they need to be extremely cautious at the moment,” Bill Blain, a London-based strategist at Mint Partners Ltd. said in an interview on Bloomberg Television’s “On The Move” with Jonathan Ferro.

Treasury 30-year yields rose two basis points to 3.06 percent on Tuesday, climbing from this year’s low of 2.22 percent set on Jan. 30.

Long bonds, last year’s superstar of the Treasury market, are punishing investors in 2015, sending 30-year yields to the highest level since November, while Goldman Sachs Group Inc. is warning they’re a “poor investment.”

“Prospective returns on government bonds remain negative,” Francesco Garzarelli, a strategist at Goldman Sachs International in London, wrote in a report Monday.

The bonds slumped more than 8 percent during the past two weeks, leaving investors with a loss of 4.8 percent since Dec. 31, based on Bank of America Merrill Lynch indexes. The move is an about-face from 2014, when they surged almost 30 percent.

In Japan, a 10-year bond auction drew bids for 2.24 times the amount for sale, the lowest in six years. The nation’s finance ministry is due to sell 30-year debt May 14.

“Sellers are dominating, following the surge in yields in the U.S.,” said Akito Fukunaga, chief interest-rate strategist at Barclays Plc in Tokyo. “The market will remain vulnerable until the 30-year bond auctions in the U.S. and Japan.” The company’s U.S. arm is one of the 22 primary dealers that underwrite the U.S. debt.

The U.S. plans to auction $24 billion of 10-year securities Wednesday and $16 billion of 30-year bonds the next day.

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