Treasuries Fall as U.S. Growth Collides With Woes of Wider World

Updated on
  • Yields climb as oil prices, S&P 500 equity index rebound
  • Data next week forecast to show improvements in sales, CPI

Treasuries fell, trimming a second weekly advance, as stocks and oil rose before a slew of data forecast to show the U.S. economy is picking up momentum.

Benchmark 10-year note yields climbed as a rebound in commodities and equities curbed demand for haven assets. U.S. retail sales and the consumer-price inflation rate both increased in March after contractions the month before, economists predicted before data due next week.

“Today is all about the S&P and oil,” said Jim Combias, New York-based head of Treasuries trading at Mizuho Securities USA Inc. Bonds “had a significant up move throughout the week, so its not surprising to have a bit of a pullback.”

Treasuries have returned 1.3 percent in the past two weeks, the biggest back-to-back gain since Jan. 15, Bloomberg World Bond Indexes show, after Federal Reserve officials warned the global economy presents heightened risks. U.S. policy makers face challenges as they seek to raise interest rates at a time of slowing growth abroad and a recovering economy at home.

The benchmark 10-year Treasury yield rose three basis points, or 0.03 percentage point, to 1.72 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 1/4, or $2.50 per $1,000 face amount, to 99 5/32.

Fed’s Warning

The yield fell five basis points since last Friday, adding to a 13 basis-point decline last week.

“Rates have been selling off less than they rally, suggesting that the market’s bias is still towards fear,” said Aaron Kohli, a fixed-income strategist at BMO Capital Markets in New York.

Former Fed Chair Alan Greenspan said Thursday that officials have to take global developments into account when determining monetary policy. Federal Open Market Committee members are concerned that slowing world growth will restrain U.S. exports, according to minutes of the Fed’s March meeting issued this week.

“As we know, the Fed has a third mandate now and that’s global growth,” said Thomas Roth, senior Treasury trader in New York at Mitsubishi UFJ Securities USA Inc. Even if next week’s U.S. retail sales and consumer price data are strong, “how Yellen will interpret those two factors, nobody knows,” he said.

— With assistance by Eliza Ronalds-Hannon, and Anchalee Worrachate

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