Treasuries Fall for Second Day as OPEC Agreement Saps Safety Bidby
Treasuries declined for a second day as a preliminary deal among oil-producing nations to limit output bolstered stocks around the world and sapped demand for the safest securities.
Benchmark 10-year yields climbed from near the lowest level in three weeks after the Organization of Petroleum Exporting Countries agreed to reduce production to a range of 32.5 million to 33 million barrels a day at a meeting in Algiers. Federal Reserve Chair Janet Yellen told lawmakers Wednesday the majority of the central bank’s policy-setting group sees a interest-rate increase as likely this year.
“The rise in Treasury yields after the OPEC news was contained because the decision to really cut production won’t be finalized until November,” said Shinichiro Kadota, a foreign-exchange strategist at Barclays Plc in Tokyo. “The Fed’s rate-increase path isn’t gaining momentum, making it unlikely for yields to extend their climb.”
The U.S. 10-year note yield climbed one basis point to 1.58 percent as of 7:37 a.m. in London on Thursday, according to Bloomberg Bond Trader data. The price of the 1.5 percent security due in August 2026 retreated 2/32, or 63 cents per $1,000 face amount, to 99 9/32.
Saudi Arabia and Iran had signaled before the Algiers meeting that an agreement was unlikely. An OPEC committee will recommend production limits at the formal gathering in November and Iran will be exempt from capping output.
There’s a 54 percent probability the Fed will raise rates this year, according to data compiled by Bloomberg based on futures. The odds fell below 50 percent on Tuesday for the first time since Sept. 15. The calculation is based on the assumption the Fed’s target trades at the middle of the new band after the central bank’s next boost.
Merrill Lynch’s Option Volatility Estimate Index, a measure of expected price swings in Treasuries known by the acronym MOVE, fell to 57.6 Wednesday, the lowest closing level since December 2014.