Treasuries Decline as Evans Joins Fed Voices Lauding U.S. Growthby
U.S. debt erases earlier gains in wake of Brussels bombings
Two gauges of U.S. manufacturing activity advance in March
Treasuries fell, erasing earlier gains, as Federal Reserve Bank of Chicago President Charles Evans called U.S. economic fundamentals “really quite good” after two gauges of manufacturing activity improved in March.
U.S. debt declined even as German bunds and U.K. gilts rose after a series of bombings in Brussels killed at least 31 and injured more than 230, putting Belgium on the highest terror-alert level. The Richmond Fed’s manufacturing survey and the Markit manufacturing purchasing managers’ index both gained.
“The market is reacting to fundamentals, which are improving,” said Thomas Roth, senior Treasury trader in New York at Mitsubishi UFJ Securities USA Inc. “We were up this morning because of Brussels, but it wasn’t a huge flight to quality.”
Evans’s comments come a day after San Francisco Fed President John Williams and Atlanta Fed President Dennis Lockhart said policy makers may raise interest rates as soon as their April 26-27 meeting. Fed officials last week left rates unchanged and pared their forecasts for 2016 increases to two from four, citing risks posed by weaker global growth and financial-market turmoil even as U.S. economic data improve.
Benchmark U.S. 10-year note yields rose two basis points, or 0.02 percentage point, to 1.94 percent as of 5 p.m. in New York, according to Bloomberg Bond Trader data. The 1.625 percent security due in February 2026 fell 7/32, or $2.19 per $1,000 face amount, to 97 5/32.
The yield fell as low as 1.88 percent earlier as the explosions in the Belgian capital fueled a bid for safe assets. Similar events in Europe, such as the 2004 train bombings in Madrid and the 2005 London Underground bombings, caused U.S. debt to surge before the moves faded later in the trading session. The most recent major attack in Paris in November had a negligible effect on Treasuries since it took place in late U.S. hours on a Friday.
“The market has become slightly more skeptical of pushing yields down too much,” said Ian Lyngen, a government-bond strategist at CRT Capital Group LLC in Stamford, Connecticut.
The difference between yields on two- and 30-year Treasuries, known as the yield curve, narrowed for the first time in three days.