economic indicators

Treasuries advance as yields near 7-week highs spur demand

LOWER IMPORT PRICES and an unexpected increase in consumer spending in April helped drive the yield of U.S. Treasury notes higher on Monday.
Posted 5/14/13

NEW YORK - Treasury 10-year notes gained for the first time in four days as yields at almost seven-week highs attracted buyers betting subdued inflation will bolster the value of the debt’s fixed payments.

The benchmark 10-year yields dropped earlier as German investor confidence rose less than economists forecast, stoking concern that global growth is faltering and spurring demand for the safest assets. Federal Reserve Bank of Philadelphia President Charles Plosser reiterated his view that the Fed should begin to curtail bond purchases as early as its next meeting.

“The market was probably a little oversold,” said Thomas Roth, senior Treasury trader in New York at Mitsubishi UFJ Securities USA Inc. “We had a pretty good move. We could get a correction over the next couple of days.

The yield on 10-year U.S. notes fell three basis points, or 0.03 percentage points, to 1.90 percent at 9:04 a.m. in New York, according to Bloomberg Bond Trader prices. The 1.75 percent note due in May 2023 gained 7/32, or $2.19 per $1,000 face amount, to $98 22/32. The yield climbed to 1.94 percent yesterday, the highest level since March 26.

Global stimulus

Central banks around the world have been buying bonds and cutting interest rates in a bid to boost growth and stave off the risk of deflation.

“Should inflation expectations begin to fall, we might need to take action to defend our inflation goal, but at this point, I do not see inflation or deflation as a serious threat in the near term,” Plosser said Tuesday in a speech in Stockholm.

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