By Deborah Levine, MarketWatch
SAN FRANCISCO (MarketWatch) — Treasury prices turned down on Thursday, pushing yields up for a fourth session, after the Federal Reserve said it would expand its bond purchases by buying mortgage-backed securities.
While expectations for a third round of quantitative easing varied across markets, U.S. stocks extended gains and the dollar fell after the Fed’s statement was released, indicating investors were more comfortable buying riskier assets than Treasurys.
“The market is responding to the risk-on aspects, MBS buying, and has backed up,” said David Ader, head of government bond strategy at CRT Capital Group.
Yields on 10-year notes 10_YEAR +2.38% , which move inversely to price, turned up 5 basis points to 1.81%, after trading near 1.73% before the release. On Wednesday, they closed at their highest level since Aug. 21, according to FactSet.
A basis point is one one-hundredth of a percentage point.
Thirty-year bond yields 30_YEAR +1.88% rose 4 basis points to 2,97%.
Yields on 5-year notes 5_YEAR +1.58% increased 2 basis points to 0.71%.
The Fed said the mortgage-debt purchases would be in addition to its current program, known as Operation Twist. It also said it would keep interest rates low until at least mid-2015 – longer than it’s said before. Read more on Fed decision.
“There is no additional Treasury buying so there may be some disappointment out of the gate on this one,” said Eric Green, global head of research for rates and foreign exchange at TD Securities.
Still to come at 2 p.m. Eastern time, the U.S. central bank will release its updated economic forecasts, which will be followed by a news conference held by Fed Chairman Ben Bernanke.
Bond yields recently rose to their highest in three weeks as stocks and other assets considered riskier benefited from a shift out of havens on confidence that the Fed would ease and on steps taken by Europe to ensure it has the tools necessary to combat its sovereign-debt crisis. Read more on bonds, Europe.
In an earlier-than-usual auction, the Treasury Department sold $13 billion in 30-year bonds. The sale garners decent demand, similar to recent sales of the long bond. Read more on auction results.
Treasury prices held their gains after a government report showed more Americans filed first-time claims for jobless benefits in the latest week than economists expected. Separate U.S. data showed wholesale prices jumped in August. Read story on jobless claims.
Deborah Levine is a MarketWatch reporter, based in San Francisco.
