MW: BOND REPORT: Treasurys lose as stocks turn positive
U.S. will sell today first $6 billion chunk of week's $64 billion in bonds
By Deborah Levine, MarketWatch
NEW YORK (MarketWatch) -- Treasurys fell slightly Monday as U.S. equities recovered from earlier losses, minimizing the appeal of the relative safety of government debt.
Ten-year note yields rose 1 basis point, or 0.01%, to 3.69%. Prices move in the opposite direction of yields, which earlier fell as low as 3.60% as global stock markets dropped.
A government report showed new-home sales rose 2.7% in September to a 464,000 annualized pace, close to the rate expected by economists surveyed by MarketWatch.
Futures traders are betting the Federal Reserve will lower its target interest rate by at least half a percentage point to 1% after its meeting on Tuesday and Wednesday. See The Fed.
The price of the November federal-funds-futures contract implied a 77% chance that the U.S. central bank will cut its target rate to 0.75%, which would be the lowest on record.
December futures show traders expect another cut that month, taking the funds rate even lower.
This week, Fed officials will also update their quarterly economic forecasts.
Gains may be limited before the Treasury Department auctions $6 billion in inflation-indexed debt maturing in 2013. Bids are due at 1 p.m. Eastern.
The securities were yielding 2.93% in earlier trading. Treasury Inflation Protected Securities, or TIPS, usually carry a yield lower than regular Treasurys of the same maturity because they add a payment for the rate of inflation when they mature. TIPS through 2013 are now negative, which is highly unusual and indicates investors expect deflation over the life of the debt.
The gap between regular five-year notes and the TIPS is negative 0.33%. The sale is a reopening, meaning the debt sold will mature at the same time and carry the same coupon as at the last sale of the maturity in April.
Shorter-term maturities may remain under pressure as traders set up to bid for $34 billion in two-year notes on Tuesday and $24 billion in five-year notes on Thursday. The amounts match last month's as the largest on record.
Two-year note yields rose 3 basis points to 1.55%.
