MW: Treasurys decline as stocks, optimism gain ground
Treasury prices fell in early action, sending yields higher Thursday, as U.S. stocks extended their advance and investors rotated out of the relative security of government debt.
Ten-year note yields ) rose 5 basis points, or 0.05%, to 2.71%. Yields move inversely to bond prices.
Two-year note yields also gained, up 3 basis points to 0.84%.
U.S. stocks followed overseas equities higher, on optimism that Group of 20 leaders meeting in London are likely to agree to more economic stimulus, at least through the International Monetary Fund, and possibly more stringent regulatory oversight. See more on the G20.
"The equity rally has Treasurys on the defensive," said John Spinello, Treasury strategist at Jefferies & Co., in an email.
In early trading, the Standard & Poor's 500 Index ) rose 2.2%.
Markets are also closely watching whether the Financial Accounting Standards Board formally changes accounting rules that would allow banks to recoup some losses already taken on illiquid mortgage assets. See more on mark-to-market rules.
U.S. debt prices remained lower after the Labor Department said initial claims for jobless benefits rose by 12,000 in the latest week, reaching 669,000. Continuing jobless claims increased to hit the latest in a string of recent records. See more on jobless claims.
Still, declines may be limited as Friday's government jobs report for March is expected to show the unemployment rate shot to the highest since 1983.
Also weighing on bonds, the Treasury Department will announce at 11 a.m. Eastern time how much in 10-year Treasurys Inflation Protected Securities it will auction next week. The bond market has enjoyed something of a reprieve from having to absorb growing debt supplies; the government had no note or bond sales this week.
Next week, besides the TIPS, the U.S. will sell 3-year and 10-year notes.
Fed still buying
Also providing support, the Federal Reserve will be buying Treasurys maturing between 2012 and 2016 later in the session -- part of the U.S. central bank's latest plan to cap yields and keep borrowing costs down for consumers and businesses.
The Fed could buy about at least $6 billion, similar to Wednesday's purchase of debt maturing in three to four years, according to Morgan Stanley strategists.
"While some may be writing off the bond market, we remind you that the Fed is still buying back massive amounts of Treasurys and we are in front of what will probably be the worst employment report we have ever seen," said Andrew Brenner, co-head of structured products and emerging markets at MF Global.
