Comments by St. Louis Fed’s Bullard, other speakers also in focus
By Deborah Levine, MarketWatch
NEW YORK (MarketWatch) — Treasury prices extended their decline Monday, pushing benchmark 10-year yields up for an eighth session, after a pair of reports showed some improvement in U.S. consumer spending and home sales, reducing worries about the economy’s trajectory that recently supported demand for bonds.
Traders were also preparing for the first of three major government-debt auctions this week.
Yields on 10-year notes (UST10Y 3.45, +0.01, +0.38%) , which move inversely to prices, rose 3 basis points to 3.47%. A basis point is 1/100th of a percent. It’s the longest string of days with rising 10-year yields since 2002.
Yields on 2-year notes (UST2YR 0.76, +0.03, +3.94%) increased 3 basis points to 0.77%, under pressure before a sale of new securities later in the session.
U.S. consumer spending rose 0.7% on a nominal basis in February, the Commerce Department said. That was a faster pace than some economists expected.
Personal incomes rose, but at a slower rate than some analysts anticipated. See story on spending, income.
“This was a fairly strong report, suggesting that U.S. households are continuing to do their part for the economic recovery despite the stiff headwinds that they continue to face,” said analysts at TD Securities.
Bonds pared losses slightly after a report showed pending home sales unexpectedly improved in February.
Still to come are a Federal Reserve buyback, speeches from two Fed officials and the Treasury’s sale of 2-year notes.
Analysts took note of comments made over the weekend by James Bullard, president of the Federal Reserve Bank of St. Louis, who said the economy has strengthened, inflation is a concern, and it may be a good idea for the U.S. central bank to reduce its quantitative-easing program earlier than planned.
It’s still reasonable to review the Fed’s multibillion-dollar program of bond purchases “in the coming meeting, especially this April meeting, and to see if we want to decide to finish the program or to stop a little bit short,” Bullard said, according to Dow Jones Newswires.
Bullard isn’t a voting member of the policy-setting Federal Open Market Committee.
“Treasurys are weaker this morning as the markets digest recent Fed statements that suggest that a growing number of FOMC members believe that U.S. growth is now on a sustainable path,” said strategists at RBS Securities.
In November, the Fed began expanding its purchases of U.S. bonds in a program that’s become known as its second round of quantitative easing, nicknamed QE2. The program is scheduled to end in June.
The Fed is also reinvesting cash from maturing mortgage-related securities into Treasurys.
