MW: Treasurys fall slightly, giving back some of rally
By Deborah Levine, MarketWatch
NEW YORK (MarketWatch) — Treasury prices fell slightly Friday, pushing yields up from all-time lows, as traders take a quiet morning to readjust positions and their outlook for the global economy.
With no major U.S. economic reports scheduled, the bond market will take its cues from and developments in Europe and how other markets react.
Yields on 10-year notes 10_YEAR +0.82% , which move inversely to prices, rose 3 basis points to 2.09%. They fell under 2% for the first time in decades on Thursday. A basis point is 1/100th of a percentage point.
Yields on 30-year bonds 30_YEAR -0.23% rose 1 basis point to 3.43%.
Yields on 2-year notes 2_YEAR +1.48% slipped 1 basis point to 0.19%. The shorter-dated securities are more sensitive to interest-rate expectations and expected to be pinned for some time since the Federal Reserve said it would keep rates low until 2013.
U.S. stock futures pointed to a lower opening, looking to extend a steep decline from Thursday after surprisingly weak economic data forced analysts and investors to revise their outlook for global economic growth. Read more on Treasury rally Thursday.
“Barring any additional leg lower in global equities or further deterioration of the situation in Europe, the Treasury market is going to find it difficult to stave off a correction to higher yields,” said strategists at CRT Capital Group.
Bonds pared losses after Federal Reserve Bank of New York President William Dudley said he revised down his expectations for the pace of recovery going forward, but he also noted some temporary factors that have restrained growth have abated.
Dudley acknowledged that the bond market’s rally could provide some support for the economy. Many analysts noted the Federal Reserve may not need to engage in more bond buying or any of the options that could be labeled a third round of quantitative easing if yields fall on their own. Read text of Dudley’s speech.
Following the Fed’s most recent monetary-policy meeting, “market interest rates generally moved lower, which should help provide some additional support for economic activity and jobs,” Dudley said according to the text of his speech. “I would note, however, that conditions remain unsettled and the equity market in particular has been quite volatile recently.”
