Treasuries Fall for First Time in Three Days as Asia Stocks Riseby and
U.S. sovereign bonds outperforming global stocks in September
Futures show about a 40 percent chance of December rate move
Treasuries declined for the first time in three days as gains in Asian stocks curbed demand for the relative safety of government debt.
The benchmark 10-year yield rose with Federal Reserve Chair Janet Yellen and New York Fed President William C. Dudley scheduled to speak Wednesday after saying this month that they still expect to raise interest rates later in the year. Reports this week are projected to show that continued strength in the U.S. jobs markets has kept unemployment at a seven-year low. The Bloomberg U.S. Treasury Bond Index has climbed 1.1 percent in September, while the MSCI World Index of shares is set for a second monthly drop , declining 5.4 percent.
“Market makers may be positioning for some month-end rebalancing given that Treasuries have outperformed equities this month,” said Michael Turner, a debt strategist at Royal Bank of Canada in Sydney. “Better sentiment in the equity markets may be also be helping push yields higher.”
The U.S. 10-year yield climbed two basis points to 2.07 percent as of 6:37 a.m. in London, based on Bloomberg Bond Trader data. The price of the 2 percent security maturing in August 2025 dropped 6/32, or $1.88 per $1,000 face amount, to 99 11/32. The benchmark yield slid to 2.04 percent Tuesday, the lowest since Aug. 25.
The MSCI Asia Pacific Index of shares rose 2.2 percent, and Japan’s Nikkei 225 Stock Average advanced 2.8 percent.
With demand for safety waning, Treasuries were becoming less attractive as the 10-year yield declined toward 2 percent, said Kazuaki Oh’e, a debt salesman at CIBC World Markets Japan Inc. in Tokyo.
Companies in the U.S. probably added 190,000 workers to payrolls in September, matching the August figure, a report from the ADP Research Institute in Roseland, New Jersey, is forecast to show Wednesday. Employers added 200,000 jobs this month and the unemployment rate held at 5.1 percent, Labor Department data due Friday will show, according to the median estimate in a Bloomberg survey of economists.
Yellen said last week that the Fed is on track to raise rates this year, even as she acknowledged that economic “surprises” could lead them to change that plan. The Federal Open Market Committee decided Sept. 17 to leave its benchmark federal funds target near zero.
Futures show about a 40 percent chance of a December move, with the calculation based on the assumption that the effective fed funds rate will average 0.375 percent after the first gain.